What is a KPI and Why are They Important?

What is a KPI and Why are They Important?
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“If it takes a lot of courage to admit that you don’t know all the answers, just image how hard it is to admit that you don’t even know the right question.”

Steven Levitt and Steven Dubner, Authors of Think Like a Freak

As club leaders steer the boat, they are faced with challenges every day. Some are handled with ease, and others require more thought and input. Key Performance Indicators (KPIs) can help club leaders (paid and volunteer) understand whether the club is on the right track, and if it’s not, KPIs can more easily identify where to make improvements and focus more attention.

Like Key Result Areas (KPAs), which focus on results of the club’s vision, KPIs focus on bringing about improvement to reach the club’s vision; helping club leaders reach desired results in key areas of the club such as golf, membership marketing, food and beverage, accounting and finance and human resources.

But with the amount of data that’s generated at a club, it’s important to choose the right measures and indictors. In other words, ask the right questions. KPIs must be aligned with the club’s core values, mission and vision. Get this right, and business performance will improve. Get it wrong, and focus will shift to delivering results on a specific measurement that has no overall positive impact on the club.

As Steven Levitt and Steven Dubner said in their latest book, Think Like a Freak, “If you ask the wrong question, you are almost guaranteed to get the wrong answer.”

So, what is a KPI? What’s the difference between a measure and a metric? And because you can measure it, does that make it a metric? And because it’s a metric, does that automatically make it a KPI?

A measurement is a number, such as members, rounds of golf or total revenue, but until you make a comparison, it’s just a number. A metric is typically a combination of two or more measures. For example, rounds of golf over time or number of dinners in a month. Metrics help illustrate whether the values are good or bad, which helps with benchmarking and budgeting. A metric becomes a KPI when it’s put in the context of the club’s vision and supported with percentages or ratios.

KPIs are tools paid management can use to communicate the club’s vision to the board and other team members or stakeholders. Five or six KPIs create a valuable roadmap for management to use, ensuring that everyone is moving together in the right direction. Departments, and even individuals within the club have their own KPIs. But it’s important that they understand the context of what they are being measured against and how it fits within the club’s vision and goals.

If you are measuring numbers that aren’t in line with your club’s vision, your KPIs won’t help you identify where to make improvements or focus your attention. Essentially, you are asking the wrong questions.

Club KPIs are likely to include some of the following:

  • Net profit
  • Member usage
  • Member retention
  • Member recruitment
  • Market share
  • Member attrition
  • Rounds of golf
  • Number of fitness classes
  • Number of spa bookings
  • Number of diners
  • Return on investment (ROI)
  • Employee satisfaction

Heather Arias de CordobaHeather Arias de Cordoba is vice president of creative and associate editor with Boardroom magazine, the resource of choice for private club directors, presidents, owners and general managers (http://www.boardroommagazine.com). She can be reached at (949) 365-6966 or via email at heather@boardroommag.com

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