Small businesses routinely face compliance issues relating to federal and state regulations, business ethics, employee conduct and adherence to business standards. Although well-written policies and standard operating procedures are helpful for communicating good intentions, the absence of an effective system for measuring performance means you may be leaving compliance up to chance. One way to assess the success of business programs and policies is to incorporate a set of quantitative performance metrics called key performance indicators.
The goals of KPI compliance are to assess whether business programs and policies are accomplishing their stated objectives, identify areas in need of improvement and provide ways to control and monitor employee performance. In addition, insisting on KPI compliance demonstrates your business’s intent to establish an environment of accountability. Meeting these objectives requires process, activities and outcome KPIs. Process KPIs assess business policies, activities KPIs assess compliance-related activities and outcome KPIs assess whether KPI compliance is yielding positive results. All three are vital because taking steps such as creating clear business policy and providing employees with initial and ongoing training doesn’t necessarily mean you’ll achieve 100 percent compliance.
Although KPI compliance can be incorporated into most aspects of a business, they most often apply in revenue generation, cost control, process improvement and customer satisfaction areas of a business. In addition, while KPIs often reflect best practice recommendations, they can consider anything a business chooses to measure. In fact, the key to using KPIs effectively is to be selective. The most useful are those your business requires either in making important business decisions or in shaping and driving appropriate employee behavior.
Program and policy objectives determine what constitutes an effective KPI. In general, each KPI chosen should relate directly to a specific objective and benchmark measurement. For example, in a retail business, employee performance and good customer service are often among the most important business objectives. KPIs relating to employee performance might include average time to complete a task such as stocking shelves, and the percentage of processes, such as checking customers out at the register, where task completion falls within 5 percent -- plus or minus -- of a predetermined completion range. Customer service KPIs might include number of customer complaints, number of escalations and customer ratings of service.
Regularly scheduled KPI compliance assessment audits are vital to assessing the overall effectiveness of a business’s compliance practices and protocols. Calculating and comparing KPI measurements against a preset benchmark provides information the auditor needs to determine whether the policy or action being examined complies with established standards. The ratio of compliant to non-compliant processes and actions becomes the basis for determining whether the business’s policies and standard operating procedures are effective or whether they require further attention and modification.