The Power Of A KPI

As we said at the start of this module, Key Performance Indicators are quantifiable measures, used to monitor performance in terms of meeting defined and agreed strategic and operational goals.

Reviewing them indicates the progress of the company, and its staff towards achieving their targets, and their effectiveness in achieving key business objectives and reaching targets.




The power of a KPI though, is in the opportunity it affords to the team to take corrective action and optimise the performance. There is little point in devoting time and effort to the development and implementation of a KPI scheme if the team then don’t think about them again until the year end, or bonus time, or performance review.

The business KPIs should be at the front of everyone’s mind all the time -the first thing everyone thinks about every day, whenever they make a business decision, a living thing, part of the fabric of the company.

So regular review, followed up with discussion and feedback on what is required to meet the target, is the way to use them effectively. Remember the example earlier about the distance to go on sales and the implication for every single sales person? £100, 000 short of the sales target, 5 sales people, we need each of them to generate another £20,000. That’s what your entire team need to be thinking about all the time.

KPI Best Practices

Measuring and monitoring business performance is critical but focusing on the wrong key performance indicators can be detrimental. As are poorly structured KPIs, or KPIs that are too difficult, costly to obtain, or to monitor on a regular basis.

So what makes business performance indicators “key” and how should a business owner, executive or manager select them? There are some factors that separate effective, constructive KPIs from detrimental, destructive ones.

Here are some guidelines to help you choose the best KPIs for your business; –

  1. Review the strategic goals and objectives of your company. Are they still relevant in the light of current market conditions, competition etc?
  2. Aligned – Make sure the KPIs you choose are aligned with the strategic goals and objectives of your company.
  3. Easily measurable – The data you need to measure KPIs can be easily obtained. To check this, think through the data you will need to collect and analyse as you develop the KPI
  4. Don’t conflict – KPIs should keep everyone on the same page and moving in the same direction. You will need different ones for different levels of staff, keep them consistent
  5. Accurate – The data flowing into the KPI should be reliable and accurate.
  6. Actionable – Does the KPI give you insight into the business that is actionable? There is no point targeting people on things they can’t control
  7. Current – Your business is always growing and changing. Your KPIs should evolve as well.
  8. Focused -too many KPIs will be time consuming, confusing for everyone and difficult to manage. Write what you think, then cut back until you have a manageable, but insightful, few to focus on

Summary

So that completes our review of KPIs. I hope this series has helped you to understand that, used effectively, KPIs can help to accomplish the goal of managers, departments and team members working towards the same objectives, aligned with the company strategic direction.

It is important that the KPIs are written in such a way that they are appropriate for each level of the hierarchy, are easy to measure and report, and so provide a quick, effective update on progress. They should also highlight areas where action needs to be taken to achieve the stated goals.

Comments

The Power Of A KPI — 52 Comments

  1. This lesson is highly appreciated. KPIs are indeed an invaluable set of tools which my team as a whole (at different levels in the company) needs to monitor progress as we strive to achieve both our growth and profit goals.