Thresholding is when you set benchmarks for specific key performance indicators (KPIs) or metrics, measure your results against those benchmarks, and then receive notifications for results that hit a specific threshold value.
What is thresholding?
Thresholding is an important part of interpreting the performance of your business. Companies generally measure their performance with the use of specific metrics. Those KPIs are then benchmarked against various values:
- The results from the previous day, week, month, or year
- Industry standards
- Expected results from financial projections
These are all good ways of understanding how well your business is doing. However, they are not as timely as measuring success by thresholding. Thresholding is a way to create notifications in real time, or near real time, that alert you to how your company is doing according to your core metrics compared to the values you require.
Why is thresholding important?
Setting up thresholds of your KPIs to receive alerts to issues before they get out of control is a great way to add consistency to your business results. This is especially important when your business experiences rush hour traffic that has an outsized impact on the results of your day or week.
For example, quick service restaurants (QSRs) often have two to three key hours of drive-thru service that make or break their daily revenue results. If a trainee is slow at the drive-thru POS, thresholding will give you a notification of the lower throughput so that you can change the staff assignments before you lose revenue.