Key Performance Indicators: Three Reasons KPIs Are Critical for Manufacturers

CFOs, controllers, and other financial executives often find themselves wearing many hats, including overseeing accounting, finance, IT and cybersecurity, strategic planning, budgeting, and managing employee teams. It can be a challenge to find the time to invest in analyzing performance—and the sheer amount of information in your financial statements and other reports can be overwhelming. By identifying key performance indicators (KPIs), management can focus its analysis on the factors that are most meaningful in determining performance.

A KPI is generally a quantitative (or numerical) figure that measures a manufacturer’s ability to meet a goal or business objective. KPIs can be defined for different areas of the business. For example, profit per employee or employee turnover can be a KPI at the company level, while cycle time, lead conversion rate or quality defects are potential KPIs at a departmental level.

If your manufacturing business is not using KPIs today, consider three reasons why these figures are critical:

1. KPIs help identify factors important to your success.
   KPIs will differ from manufacturer to manufacturer. To identify yours, your management team is forced to think critically about what is most important to your business. For instance, those businesses striving for sales revenue growth might see their success at turning leads into sales as a KPI, while manufacturers focusing on improving operational efficiency might concentrate on cycle times or downtime.
2. KPIs can help keep your team focus on what matters most.
   Teams must understand their goals and the actions required to reach those goals. KPIs help team members focus on the important aspects of the business. Progress toward those goals can be tracked through a variety of tools, such as graphs, charts, and other visual aids. KPIs and the right communication tools help your team understand their goals better.
3. Using KPIs to measure performance helps manufacturers determine if their business plan is on the right track.
   Manufacturing executives can use KPIs to determine whether their business plans and actions are helping them meet their goals. KPIs help executives analyze patterns or trends to measure progress or determine if plans should be changed to reach a goal more efficiently or expediently.



For help with your KPIs, contact a member of the HBK Manufacturing Solutions Group at 330-758-8613 or manufacturing@hbkcpa.com.