Many different factors contribute to the success of a business. While some aspects may be easier to measure than others, it is important for managers to track as many key performance indicators (KPIs) as possible to make informed decisions about moving their business forward.
In this article, we will discuss 22 strategic management KPIs that managers should be aware of.
Further Read: Ultimate Guide on KPIs – Incl. List of 200 KPIs for Businesses
What are Strategic Management KPIs?
Strategic management KPIs, or key performance indicators, are important metrics that top management can use to track the success of their business. By understanding these KPIs and how they impact the company, managers can make data-driven decisions about where to allocate resources and how to improve operations.
While strategic management KPIs track the success of the entire business, department-specific KPIs can give a more detailed view of the performance of a specific company area. For example, sales KPIs can measure the success of a company’s sales department, while manufacturing KPIs can track the output and efficiency of a company’s manufacturing process. By tracking strategic and department-specific KPIs, managers can have a complete picture of their business performance.
Why is it essential to track Strategic Management KPIs?
Knowing the business KPIs and making data-informed decisions is essential for the success of any company. By understanding which KPIs to track and what they mean for the company, managers can better decide where to allocate resources and how to improve operations. Additionally, tracking KPIs can help with strategic planning, as managers can use data from past performance to make projections about future success.
While some aspects of a business may be easier to measure than others, tracking as many business-relevant KPIs as possible is vital to assess the company’s performance comprehensively. By understanding which KPIs are most important, managers can focus on improving those areas that impact the company’s success.
Overview of the most critical Strategic Management KPIs
- Revenue per Employee / Revenue per FTE
- Total Costs
- Net Income
- Profit Margin
- Operating Margin
- Gross Margin
- Customer Acquisition Costs (CAC)
- Customer Lifetime Value
- Customer Satisfaction Score / Net Promoter Score
- Customer Churn Rate
- Sales by Product or Service
- Sales Target in % (Actual/Forecast)
- Operating Expenses Ratio
- Net Profit Margin Percentage
- Return on Assets (ROA)
- Return on Equity (ROE)
- P/E Ratio
- Current Ratio (Assets/Liabilities)
- Debt to Equity Ratio
- Working Capital
- Employee Satisfaction Rating
Explanation of 22 important Strategic Management KPIs
Revenue is an essential measure of a company’s overall performance. It indicates how much money the company is making from its operations. This can help managers track how the company is doing and identify areas where they need to make changes to improve performance. Revenue is also critical in assessing a company’s value and attractiveness to potential investors.
Revenue per Employee / Revenue per FTE
When measuring a company’s success, looking at more than just the total revenue generated is essential. It would be best if you also looked at the revenue per employee or revenue per FTE. The relative measure will give you a better indication of how efficiently the company is generating revenue and whether or not they are becoming more or less successful over time.
Companies need to have an overview of their costs, best broken down into departments and topics. This allows them to see where they are spending the most money and where they may be able to save. Costs can vary significantly from department to department, so it is essential to understand where each dollar is being spent.
Net income is an essential measure of a company’s overall performance. It indicates how much money the company makes from its operations after deducting expenses. This can help managers track how the company is doing and identify areas where they need to make changes to improve performance. Net income is also a critical factor in assessing a company’s value.
Profit margin is another good indicator of overall performance. It indicates how much money the company makes from its operations after deducting expenses. This can help managers track how the company is doing and identify areas where they need to make changes to improve performance. Net income is also a critical factor in assessing a company’s value.
The operating margin is an essential key performance indicator for strategic decisions. It indicates how much money the company makes from its operations after deducting expenses. This can help managers track how the company is doing and identify areas where they need to make changes to improve performance. Net income is also a critical factor in assessing a company’s value.
The gross margin is another crucial measure of a company’s overall performance. It indicates how much money the company makes from its operations after deducting the cost of goods sold. This can help managers track how the company is doing and identify areas where they need to make changes to improve performance. The gross margin is also critical in assessing a company’s value.
Customer Acquisition Costs (CAC)
A strategically important KPI is also the overall Customer Acquisition Costs. This metric determines how much a business spends to acquire a new customer. Keeping this number as low as possible is essential to maintain profitability. Many companies use marketing and advertising campaigns to bring in new customers, and the cost of those campaigns needs to be closely monitored to stay within budget.
Customer Lifetime Value
Customer lifetime value (CLV) is a critical key performance indicator (KPI) for companies that want to measure the success of their customer retention efforts. CLV considers the amount of money a customer spends with a company over their lifetime relationship with that company. It can be used to help determine how much effort a company should put into retaining a particular customer.
There are a few different ways to calculate CLV, but all of them attempt to capture the long-term value of a customer. One common way to figure it out is to multiply the average purchase amount by the average number of purchases made per year and then subtract the customer’s churn rate (the percentage of customers who stop doing business with a company in a given period).
A high CLV is desirable for companies as they profit more from their existing customers. Measuring and tracking CLV can help companies focus on retaining high-value customers and increasing their profits.
Customer Satisfaction Score / Net Promoter Score
Customer satisfaction and net promoter scores are two critical indicators for management when measuring customer loyalty and satisfaction. A high customer satisfaction score means that customers are generally happy with the product or service. In contrast, a high net promoter score means that customers will likely recommend the product or service to others. These scores can help management determine areas to focus on keeping customers happy and increasing loyalty.
Hint: The net promoter score is calculated by subtracting the percentage of customers who are detractors from those who are promoters.
Customer Churn Rate
A customer churn rate is a management key performance indicator (KPI) used to measure how many customers a company loses in a given period. Companies need to track their churn rate to understand how well they retain their customers and identify any areas that may need improvement. Low churn rates are typically indicative of a high-quality product or service, while high churn rates can signify that customers are unhappy with what they are receiving.
Sales by Product or Service
A company needs to track the sales of its products and services to make informed management decisions. By analyzing sales data, a company can identify which products or services are selling well and which are not. This information can help the company decide what products or services to focus on and which ones to discontinue. In addition, tracking sales by product or service can give a general overview of the company’s overall performance.
Sales Target in % (Actual/Forecast)
A sales target in % can be a helpful Indicator for management because it measures how successful a company is at keeping the sales targets in line. A high sales target achievement % means that the company is doing well, while a low sales target % means it needs to work harder to improve its sales. Sales targets can also help motivate employees to sell more products and services by showing them short- to mid-term goals.
Operating Expenses Ratio
The operating Expenses Ratio can be used as a key performance indicator to measure a company’s efficiency. It is calculated by dividing a company’s operating expenses by its revenue. This metric can help companies determine whether they are spending too much on operating expenses and need to find ways to reduce costs.
Net Profit Margin Percentage
Net Profit Margin Percentage (NPM) measures the organization’s financial health. It is calculated by taking a company’s net profit and dividing it by its total revenue. The higher the NPM, the more profitable a company is. This metric is essential for small businesses, as it can indicate whether or not they are on track to becoming sustainable enterprises.
Return on Assets (ROA)
A top-level management performance indicator (KPI) is Return on Assets (ROA). This measures how efficiently a company is using its assets to generate profits. It is calculated by dividing net income by average total assets. A high ROA means that the company is making good use of its assets and is generating profits from them. ROA can be a good indicator of how well the company performs. Management should track ROA over time to see if it is trending up or down and take corrective action if necessary.
Return on Equity (ROE)
Return on Equity (ROE) measures a company’s profitability by considering the amount of shareholder equity used to finance its assets. It is calculated by dividing net income attributable to shareholders by average shareholder equity.
ROE is an important indicator because it measures how efficiently a company uses its money to generate profits for shareholders. A high ROE indicates that the company is generating more profits from its invested capital, while a low ROE suggests that it could support its money more effectively.
Management and shareholders use ROE as a performance metric to assess a company’s performance.
The price-earnings (P/E) ratio is a key performance indicator that management can use to measure how the market values a company’s stock. It is calculated by dividing the current share price by the earnings per share (EPS). This measures how much investors are willing to pay for each dollar of EPS. A high P/E ratio means that investors are expecting high future growth, and a low P/E ratio means that investors are expecting low future growth. Management can use this information to decide how to grow the company and increase its stock value.
Current Ratio (Assets/Liabilities)
The current ratio is a key performance indicator for management because it measures a company’s ability to pay its short-term debts. A high current ratio indicates that a company has more assets than liabilities and is in an excellent position to meet its short-term obligations. On the other hand, a low current ratio could indicate that a company is having difficulty meeting its short-term debt obligations.
Debt to Equity Ratio
The management team should constantly monitor the debt-to-equity ratio. A high debt-to-equity ratio can indicate that a company is in financial trouble and may be unable to repay its debts. A low debt-to-equity ratio can show that a company is in a solid financial position and may be able to borrow money at low-interest rates.
Working capital is an essential measure for management decisions. It is the cash available to a business to pay its current liabilities. The calculation includes short-term assets, such as cash, accounts receivable, and inventory, minus the current liabilities.
A high working capital ratio means that a company has more money than it needs to pay its bills in the near future. This indicates that the company can quickly meet its obligations and may have room to expand operations or make acquisitions. A low working capital ratio suggests the company cannot cover its short-term liabilities without selling assets or borrowing money.
Employee Satisfaction Rating
The employee satisfaction rating should also be used by management to make decisions about the company. If the rating is low, the company may need to make changes to improve employee satisfaction. This may include management changes, pay, or benefits. If the rating is high, the company can continue with its current policies and may even want to consider increasing employee satisfaction further.