How to Measure and Manage Business Performance
Improving sales and profitability is not a one-time task; it requires a continuous effort from all departments and operations over an extended period of time.
By tracking business performance through metrics and key performance indicators, companies can optimize internal operations to ensure all departments are working in unison. This provides valuable quantitative data to enhance decision-making and management skills.
What is Business Performance Management?

Business performance management (BPM), also known as corporate performance management (CPM) and enterprise performance management (EPM), refers to the methods, processes, and workflow that companies use to manage their performance.
BPM typically includes software, planning, data collection, analysis, and reporting used to help organizations achieve goals. This is a broad concept as it can be applied to every business process to improve performance and reach the desired outcome.
Standard BPM processes include-
- Budgeting and Forecasting
- Business Modeling
- Dashboarding
- Scorecards
- Data Consolidation
- Management Systems
- Financial and Management Reporting
- Compliance, Corporate Governance, and Internal Control
- Risk Management
- Business and Predictive Analytics
Through data collection and evaluation, management can use historical information to determine what changes need to be made to optimize systems. BPM that uses technology enhances a company's functionality and business intelligence.

Regardless of the processes used, BPM consists of three crucial activities-
1. Select business goals and identify which systems and policies impact the company's progression towards the objectives.
2. Gather and monitor information to analyze progression.
3. Review results and make adjustments where necessary to improve efficiency.
Proper BPM is very important, as it-
- Enhances Decision-Making
Decisions should not rely on guesswork or personal intuition alone, it should be supported by factual evidence, such as metrics and analytics. By making data-based choices, management can actively improve efficiency, profitability, and productivity.
- Increases Efficiency
- Unites Departments
- Identifies Risks
How is Business Performance Measured?

As market trends continuously change, businesses need to ensure that they can adapt to optimize their performance. Companies can measure their performance by following four steps-
1. Set Goals
Goals are different for every business, some want to attract more customers while others focus on retention rates.
Common business goals include-
- Increasing Sales
- Enhancing Customer Service and Satisfaction
- Boosting Profit Margins
- Increasing Market Share
- Lead Generation
- Optimizing Operational Efficiency
- Streamlining Processes
- Driving the Bottom Line
- Expanding Sales Channels
- Enhancing Marketing Strategies
By clearly stating the business objectives, departments can focus their efforts on creating a productive work environment.
2. Develop Key Performance Indicators
Key performance indicators (KPIs) are metrics that provide insight into how a company is performing. Standard KPIs include generated revenue, productivity levels, and output metrics. These insights enable management to track their progress towards desired outcomes.
Setting a benchmark KPI is helpful for monitoring performance and is different for every business. Therefore, managers should take the time to choose a KPI that is feasible and productive.

3. Define Metrics
Business metrics, like KPIs, are measurements used to monitor and evaluate a system's performance. However, metrics tend to focus on specific processes, such as marketing, sales, and accounting.
These measurements provide stakeholders and employees with a quick look at performance and profitability.
4. Monitor and Measure Data
Lastly, management needs to narrow down the KPIs and metrics to determine which measurements are relevant to the established goals. This ensures crucial figures are not overlooked.
What Does a Key Performance Indicator Measure?

KPIs are excellent tools to measure the real-time performance of individual processes, tasks, and departments. Once a business sets their KPIs, they can develop effective strategies to reach their goals, evaluate their progress, and record their performance.
There are many different operations that businesses can track using KPIs, such as-
Financial Performance
When performing a company's finance review, management can assess cash flow, capital, cost base, growth, sales, and expenses to create KPIs. This makes it easy to leverage financial data to improve business strategies.
Profitability
Most businesses seek to drive profits and therefore monitor profitability KPIs, such as-
- Operating Margin
- Gross Profit Margin
- Net Profit Margin
- Return on Investment (ROI)
Customer Loyalty and Retention
By collecting customer feedback, reviews, and suggestions, businesses can develop KPIs to track customer loyalty and retention. Management can gather this information from social media, sales data, surveys, and filed complaints. This enables companies to identify what systems and services need improvements.

Employee Performance
With management systems, such as employee and point-of-sale (POS) software, supervisors can collect employee performance KPIs, such as profit, sale, and contribution per worker. This helps determine if some employees need extra training to improve customer service and sales skills.
Benchmarking
Benchmarking is the practice of setting short-term milestones to help businesses reach their goals. By carefully planning benchmark KPIs, companies can compare their performance with expectations to determine if their objectives are reasonable or need to be adjusted.
Competitor Evaluation
Analyzing competitors looks different for every industry. Depending on the market, businesses may want to track competitors' pricing, product lines, services, or competitive advantages. Monitoring these elements enables companies to pinpoint their own strengths and weaknesses to improve performance.