Strategy Resources

Successful KPI Management

We talk a lot about KPIs within strategic management. After all, if you choose meaningful KPIs, you will measure the key activities that actually achieve those all-important strategic objectives. But what about KPI management in practice? How do we translate the theory to practice and manage KPIs for results? And most importantly of all, what KPI Software should we use to manage our KPIs?

What does successful KPI management look like?

There are two key elements to getting KPI management right. Firstly, you must choose the correct KPIs, and secondly, they must be embedded in procedures and processes that support their achievement, in order to steer the business towards its intended direction.

If you can do this successfully, your team will maximise their own outputs and productivity. And this ability to leverage the productivity of organisational assets and resources is the true mark of team success.

Keep it simple

The KISS Principle of management (Keep It Simple, Stupid!) works perfectly for key performance indicators. We’ve said before that a set of three to five KPIs per objective is a good, solid number. Why? Because they need to be ‘key’. Focus on the measures that really matter and staff will be focused and productive.

Conversely, if you try to create too many measures, the team will become frustrated and lose interest – and patience – in what the business is trying to achieve.

Choose the right measures

Decision paralysis often strikes at this point! So try this two-point approach:

• As a manager or business leader, which five pieces of business data do you first want to see when you begin work each day? Which 5 measures will instantly tell you what you need to know about progress? Focus on these.
• Check that these 5 proposed KPIs will measure progress towards the business’s strategic goals. They aren’t the goals themselves.

Define the KPIs that you plan to manage

SMART criteria are excellent here. Go back to the goals that you are trying to achieve and then ensure that the KPIs will support them. This means checking that:

• Each goal chosen is Specific
• Each goal can be Measured (with the KPIs that you’ll choose)
• The goal is Attainable
• The goal being measured is Relevant (to the organisation’s overall strategic direction)
• A defined Time-frame can be established for the goal.

Work together – It’s well worth finding the time to really sit down and think about this stage carefully. In the quest to manage a specific department as well as possible, individual managers can easily become siloed and too focused on their own particular function.

The risk here is that the overall business goal becomes lost amongst operational targets – and that other, equally important, KPIs that apply across-departments, simply aren’t factored in.

Local metrics must not compromise the output of the organisational whole. So how do you manage this? Communicate and work with your peers. Understand where linkages need to exist for a holistic, coordinated effort that achieves the business strategy as a whole.

Communicate more than the ‘what’

Yes, the obvious first stage of KPI management is to communicate what those KPIs are to the team. But what is more important is communicating the reasons behind each KPI and the ways in which they will be achieved; the KPI ‘whys’ and ‘hows’.

A KPI should always be related to a business objective or an outcome. Measuring for measuring sake is a waste of time and effort. This is true both at a strategic level and an operational level. When creating KPIs to measure the success of a strategy, a Strategy Map, like the one below, can be used to provide a high quality visual representation of where KPIs fit is relation to the ‘strategic picture’.

Click on image to enlarge

When you start to describe KPIs in this richer and more meaningful way, KPIs themselves come to life. Your staff will really understand their value contextually. By having this insight into meaningful KPIs, they can better innovate, seek out new opportunities, optimise processes and create better solutions to achieve them.

Equally, by really understanding KPIs, your people may be the first to recognise when a KPI no longer serves a purpose by failing to meet a primary goal of the business.

The questions you need to clarify here are:

• The process to achieve each KPI
• The ownership of progress towards each (a named individual/s in your team)
• How your team will present progress on each KPI and share it across the organisation.

Create your KPI dashboard

Once you’ve chosen your KPIs and defined each metric, you can create dashboards to provide immediate, intuitive and real-time snapshots into your progress. Your peers and senior managers will be able to assess your team’s process and share related information.

Remember to check out systems such as QuickScore to make this process easy.

Once you have your KPI dashboard in place, keep it alive by regularly updating it, adding context and commentary for sharing, circulating the data and using it to stimulate discussion and decision-making. A dashboard is a tool that needs to be kept alive – and as a tool, it is only as valuable as the data added to it!

Consider KPI pairing

As a manager, you will look at your KPIs daily – but it is still important to retain a balanced approach across your department, rather than optimising all activity solely towards those five KPIs and at the expense of other important business measures.

For example, if have a KPI that relates to a superb customer service (appropriately quantified of course!) – but deliver this by over-serving accounts and increasing customer cost-to-serve in the process, the balance is unfavourable.

A good way to avoid this is by pairing up your KPIs. So in this example, monitor customer experience against customer cost of service. This pairing acts as a check and balance.

Know when to make a change

KPI management involves changing and evolving as business conditions and priorities change. Yes, if you set KPIs and forget about them, you will fail. But there are occasions when some KPIs must be changed or let go.

KPI management does involve assessing performance in the ‘now’, but it also needs to act as a predictive guide for the future, by indicating next step actions.

Regularly review your KPIs and if they no longer serve what you are trying to achieve, simply lower their priority rather than losing them completely. Question each KPI and its worth, discuss your thoughts with your team, be open to change!

In conclusion

KPIs are complex and a huge topic in their own right. Much as we might like them to be, KPIs are far more than simple analytics and hard data.

Great managers are prepared to keep learning about KPIs and to grow in their understanding of selecting, measuring, communicating, managing – and even changing – KPIs to achieve real success. By committing to the process, Key Performance Indicators can truly become part of the corporate culture – and a vital step in the road to strategic success.