Performance is everything in business.
How your business performs directly impacts your overall success, growth, and sustainability.
If your company is generating good profit from its resources and achieving its objectives, great. If profit is hard and slow and you’re failing to hit goals, there’s work to be done.
We recommend you monitor your business performance at least quarterly, sometimes monthly, depending on your situation. But what does performance monitoring involve, and how do you go about it?
Monitoring business performance isn’t just about your finances—although this is an important part of it.
Holistic business performance monitoring also involves looking at the non-financial or operational aspects of your business. This includes things such as:
While financial metrics provide crucial insights into the financial health of your business, operational metrics offer a deeper understanding of your company's internal workings and efficiencies.
The key reason for monitoring your business performance is to answer the question: “Are we achieving what we set out to achieve?”
As well as providing you with a clear understanding of how well your company is performing against its goals and objectives, by monitoring key metrics and indicators, you can also:
Once you’ve identified these, you can take action to exploit or mitigate them.
On the strengths and weaknesses side, this might mean continually investing in areas where your business excels or streamlining your workflows to improve operational deficiencies.
Meanwhile, from an opportunity and threats perspective, this could involve identifying new markets or customer segments or strengthening your supply chain.
Essentially, monitoring business performance helps you look critically at your business and determine what you could be doing better.
Now we know the what and why, it’s time to look at the how.
Monitoring business performance involves systematically collecting, analysing, and tracking relevant data and metrics.
The first step is to identify your key performance indicators or KPIs. These are the specific metrics most relevant to measuring the performance of your business.
Examples include financial indicators (revenue, profitability), operational metrics (production efficiency, customer satisfaction), and marketing metrics (conversion rates, website traffic).
You also need to establish specific, measurable targets or benchmarks for each identified KPI. These targets should be aligned with your business goals and objectives.
It’s then time to collect and analyse your data. This data could include:
When analysing the data, you want to look for trends, patterns, and areas where you’re meeting or falling short of your targets. Data visualisation tools or software can be excellent for this.
You should also compare your performance against industry benchmarks, historical data, or competitor metrics to gain a broader context and understand your relative standing.
For the financial side, we recommend preparing a financial forecast and measuring actual to budgets. We also suggest you measure this year’s financial results with previous ones. What are the learnings and actions you get from this?
When it comes to analysing things like culture, as well as looking at employee feedback collected from surveys, reference back to your brand values and see if they’re being lived.
For both the financial and non-financial aspects, always look back to your overall business strategy and review your performance against it.
Monitoring your business performance should be a collaborative effort involving various stakeholders inside and outside your organisation.
These stakeholders include:
Without all of the above involved, you won’t get an accurate picture of your business’s current performance, impacting the subsequent decisions you make and actions you take.
A good way to sum things up is to say that monitoring business performance is like fitness tracking.
It involves measuring and analysing different metrics and key performance indicators (KPIs) essential for your business's health and growth—and making proactive and positive changes to see improvements.
When we monitor our business performance, we’re taking responsibility for our business. It holds you accountable for the results and drives self-reflection, transparency and communication.
Through monitoring business performance, you can learn from your mistakes, initiate change and drive performance improvement, positioning yourself for long-term success.
If you need some support with monitoring performance in your business or understanding or acting on the insights, reach out to your Maxim advisor or get in touch with our team.