In my role as a business adviser and as a member of many advisory boards for clients, a regular topic of discussion is KPIs or Key Performance Indicators. What should they be? How do we set them? Who needs them?
As the name suggests KPIs should be the key measures that indicate how a business or a division, team or employee of the business is performing. So how do you determine what are ‘key’ for the business let alone for a staff member such as a junior team member? Start with the strategic plan and the financial budget for the business. If your business does not have both of these documents then you need to ask yourself why? Furthermore you need to get these in place as soon as possible.
All too often KPIs are set from sources not really related to your own business such as an article that you read, a friend’s business, an advisor told you or your industry body says it is what you should measure. When selecting your KPIs you need to keep it simple and ensure they are relevant for your business. If they are not then why do you care? Sure there are common KPIs that are relevant to many businesses, these are most likely financial or team related but to really assess your business performance and ultimate success you need to determine what the most important aspects of your business are. By that I mean what absolutely has to happen or work in your business in order for the business and you to be successful??? For example, if I run an online sales business and my point of differentiation is availability of product then a key aspect of my success will be no or limited back orders. Once you have determined this you can set a measure or KPI to assess and drive it. The important aspects that you determine should also form part of your overall strategic and financial plan.
Once you know what the KPIs (or whatever terminology you use for success measures) are then all other measures and KPIs within the business such as for a division or a manager or even the junior team member should flow on from them, a cascade affect and be able to be linked back to the business KPI. Why? Simple really, if the KPIs at any level or for any person within the business link to the overall strategy then each level should build on the last to eventually have the business KPIs and your ultimate success achieved.
A couple of other tips would be not to have too many KPIs as you will lose focus and create confusion; you will likely spend more time reporting rather than analysing and driving your business and make sure that you can easily report on the KPI otherwise you will not seek the information, therefore not measuring it and ultimately not managing it!
It astounds me how disjointed some businesses KPI framework is even to the extent I have seen different divisions have measures that actually work against each other…ridiculous. With a little thought about what you are trying to do and achieve you can design a KPI framework that will have everyone and everything within your business walking in the same direction to your goals. Think about it, and if your business needs some work then do something about it and by all means let me know. The more business people that can share successes with others the better.