Using KPIs to manage your business
It’s all too easy to get lost in the complexities of strategic planning and the detail that comes with it. From debating reporting scorecards to considering data sets for measurement, the risk is always losing sight of the bigger picture.
So let’s get back to basics and recap one of the most important elements of strategic planning; Key Performance Indicators, or KPIs.
Remind me, what’s a KPI exactly?
When your team get lost down a rabbit-hole of tactical measures, it’s time to remember that:
- KPIs are completely linked to your strategic goals. If the measure doesn’t measure your progress towards these strategic goals – it’s not a KPI!
- KPIs are chosen values that measure effectiveness. They can be counted or evidenced, and compared over time.
- Some KPIs are pretty much universal – think net profit margins for example – but others will be specific to your industry and business.
Some KPI examples
Some good starting point examples for KPIs are:
- Customer services teams might use metrics for call hold time, pick-up time and positive customer survey results.
- Operational areas might select process efficiency metrics.
- Marketing might consider the proportion of sales generated from campaigns, and assign a revenue figure to them.
- Sales functions might look at deal sizes and values, customer acquisitions, conversions, new business and the value of the deal pipeline, to demonstrate movement towards organisational revenue targets.
- HR would measure metrics relating to recruitment costs, turnover, engagement, sickness and so forth.
A good starting point…
Here is a list of common KPIs by Sector that you might find useful.
Why is it so hard to develop KPIs?
It takes a blend of art, experience and science to create the right KPI set. Most managers can instantly come up with a dozen things that they need to measure in their own functions – but no organisation can accurately track huge volumes of KPIs! The trick is to find a manageable set of measures that really focus on key strategic goals.
Four challenges to overcome are:
- Not overly focusing on financial measures. The true health of an organisation requires broader measurement – and this needs a clear overarching strategy and supporting objectives.
- Compensation and reward. If you tie these to certain measures only, there’s a risk that your people will only focus on there.
- Frameworks and systems. a) Having the right framework in place to accurately manage your KPIs – such as the Balanced Scorecard. b) Having the right reporting system in place to accurately report on your chosen KPIs, such as QuickScore.
- Management. Ensuring a regular process of revisiting and revising KPIs as part of the ongoing fine-tuning approach – with focused effort and motivation from all contributors.
Questions to ask when choosing your KPIs
To help keep your execs on the right track at KPI setting point, ask these questions:
- Are they a fundamental deliverable of the business strategy
- Are they SMART in principle? (Specific, Measurable, Achievable, Realistic and Time-bound.)
- Can they be directly influenced or controlled by the business?
- Do they measure improvements over a period of time? (And can comparative thresholds be applied, which measure good, bad or indifferent performance thresholds to contextualise results?)
The lead and lag factor
Each chosen KPI is measured over time. The delivery plans which enable them are refined over time, to improve KPI results in pursuit of the strategic overall objectives. Some will be lagging – measuring financials for example of a past period. Other KPIs will be leading – indicating likely future performance, such as pipeline business.
The KPI management and review process
When using KPIs to manage your business, your KPI set must be regularly reviewed by managers and stakeholders and viewed together to see trends over time, rather than in isolation. The Balanced Scorecard method puts a sound, proven management framework in place. A system such as QuickScore then makes it easy to regularly provide easy-to-understand dashboards that communicate KPI progress. QuickScore allows you to rapidly create results dashboards with graphs, figures, charts and commentary that meet your reader’s unique communication style and preferences. It also makes presentations and reports easy and professional.
The importance of good KPI reporting software
It’s vital to report KPIs regularly against a schedule. But attempting to do this manually is nearly impossible in today’s complex and data-rich organisations! Good KPI reporting software automates the process. We are pleased to recommend QuickScore to make this easy. Its benefits include:
- Full control over measures and data sources
- Simple and intuitive to use
- Powerful reporting with dashboards created using pre-designed widgets
- Extensive customisation options as required
- Reports and presentation templates
- KPI results that are presented in real-time, with the ability to interrogate results, collaborate, comment and more.
Find out more about KPI Software here.
KPIs are tools that measure your strategic process. Don’t get caught up in isolated and individual KPI movements, but look at the overall picture. Do your KPIs show that your organisation’s efforts and resources are on track to deliver the strategy? Or do they suggest that further work or a rethink on your delivery plan is needed to take you there?
If you’re struggling with using KPIs to manage your business? Ask yourself first whether the strategy and objectives that you are attempting to measure are correct and in place. If they are, it will make your KPI creation easier. If they aren’t – you aren’t ready to hit those KPIs just yet!
Here to help
The team at Intrafocus work with commercial and non-profit organisations from across all sectors to develop their strategies. We can support you in your process whether you are a small start-up or a large multi-national. The first step is usually the strategy workshop and our facilitators create a focused, energetic and positive experience that delivers! Contact us for a no-obligation chat about your needs and we’ll be delighted to assist.
Using KPIs to manage your business:
We also have a guide to Creating Meaningful KPIs which is available to download for free.