Look to your KPIs…
KPIs are one of the most powerful tools available to drive the results you desire.
If your company is having trouble achieving the results you desire, it’s time to look at the set of Key Performance Indicators (KPIs) you established for your company and how you are using them.
How do you use Key Performance Indicators (KPIs)?
KPIs are the key metrics that a company tracks to give insight into the current (and future) health of the company.
When companies monitor their KPIs closely, it’s possible to identify a problem and set out to fix it before it’s too late.
Many companies might establish key performance indicators, but if they aren’t using them correctly (or they aren’t tracking the appropriate KPIs) they won’t produce the results leaders seek.
When KPIs are used in the right way, they keep teams aligned, accountable and focused on the same goals.
Every organisation should establish KPIs in four key operational areas.
- Employees
- Customers
- Processes
- Revenue
There should be a few KPIs established within each area that enables the team to quickly and easily discern if the organisation is on track to achieve its objectives.
This allows your team to maintain a balanced perspective on the organisation, while not ignoring any concerns needing to be dealt with in other areas.
Be aware to include:
- Leading Indicators, that help predict future outcomes because they measure the performance of day-to-day operations (i.e. number of qualified sales leads).
- Results or Lagging Indicators, that represent what has been achieved over a period of time (i.e. sales revenue).
In addition to the core KPIs that help you monitor the four key operational areas, additional strategic KPIs can be layered in to help solve a problem or support specific priorities.
Think about what problems you’re trying to solve or business results you’re trying to accomplish to determine what additional KPIs should be established.
The KPIs you set need to be specific and measurable with an easy-to-understand definition of success.
As you establish KPIs, discuss not only what success looks like, but define failure too.
Each KPI should include a Red-Yellow-Green success criteria where green indicates your goal:
- Supergreen is the achievement of a stretch goal,
- Red is a failure, and
- Yellow rating indicates you must take action to alter your course because you’re heading toward red.
You know a KPI is working, as it drives action. A yellow or red rating should propel the team into figuring out a way to get back on course to achieve green again. An owner should be assigned to each KPI.
Progress on KPIs and your objectives should be tracked using a dashboard that’s visible for all to see. Dashboards need to be simple and impactful so that anyone can give it a good glance and quickly understand the KPI status.
These publicly displayed dashboards help communicate progress, clarify expectations and focus the team around the few items that matter most.
KPIs drive action if they are set up properly as well as tracked and reviewed weekly. The benefit of frequently reviewing KPIs allows you to see a potential problem before it spirals out of control.
Each quarter, it’s important to audit the KPIs you established to make sure they are still serving your organisation the way you intended. Also, so that you’re not cluttering your dashboard – which can diminish its effectiveness.
Here are some questions to ask to determine if your KPIs are still relevant and effective:
- If this KPI is red or yellow, does it motivate the team to action?
- Does everyone understand the data that supports this KPI?
- Is the Red-Yellow-Green success criteria for this KPI realistic?
- Does everyone understand why this KPI is important?
We’ll share with you tips on how to create effective KPIs in future communication.
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I hope you have enjoyed these insights. Have a great week and stay growth-focused!
Best Wishes,
Jonathan
