November 24, 2020

4.1.1 The importance of measurement and target-setting

There is a well known business saying – You can’t manage what you don’t measure. While many small businesses can run themselves quite comfortably without much formal measurement or target-setting, for growing businesses the control these processes offer can be invaluable.

Knowing how the different areas of your business are performing is valuable information in its own right, but a good measurement system will also let you analyse the factors behind any changes in performance – good and bad ! This puts you in a better position to manage your performance proactively.

One of the key challenges with performance management is selecting what to measure. The priority here is to focus on quantifiable factors that are clearly linked to the drivers of success in your business and your sector. These are known as key performance indicators (KPIs).  Identifying the areas of your business it makes most sense to focus on and then deciding how best to measure your performance in those areas.  It is important to remember that while financial measures of performance are among the most widely used by businesses, nonfinancial measures can be just as important.