Navigate the KPI Jungle
We hear the term KPI in business, In the NHS, Education, and throughout most public and private organisations. Individuals and collectives are managed, monitored and measured by KPI targets. But but what really is a KPI, and how can we navigate the KPI Jungle?
In simple terms, a KPI or Key Performance Indicator is a way of measuring how well an individual or how well a company or business unit is performing compared to their strategic goals and objectives.
Selecting the right ones is important if a Manager needs to guide an individual in the right direction in order for them to deliver a correct outcome. The trouble is that there are many 1000s of KPIs to choose from and companies often struggle to select or format the right ones for their business.
Unfortunately, many companies get their KPIs completely wrong, they enter the KPI Jungle and fail to deliver results – measuring either everything that walks and moves but nothing that matters, or simply copying the metrics others may be using.
Here is how to create a KPI
- Always start with your strategy A KPI needs to fit into a context and your strategy should be the basis that everything and everyone fits into with a cause and effect process.
- List the strategic performance questions you need to answer – This establishes what you need to know as context in order to establish small-scale achievements.
This high-level approach enables you to create the best KPIs that will help you answer your strategic questions.
From experience many Managers miss this high-level approach and plumb down to the tactical level, thereby entering the KPI Jungle.
An example of how to break out of the KPI Jungle: A Sales Director/Manager may have the need to launch a new service and gain traction in a market sector. What strategic information must he or she gain in order for the company and its sales team to achieve this objective – what questions need to be considered and answered?
- What businesses operate in this market sector?
- Where is our service applicable?
- Who are our competitors?
- How do we differ?
- How do we penetrate the market sector?
- Who are our first enablers?
- What level of penetration can we achieve in year 1?
- Where do we need to be in year 3?
Only then can he or she create meaningful KPI’s for the Sales Team at a tactical level.
These may look like:
- Identify X number of prospects in our market sector/geographical location per time period
- Identify opportunities where our service can add real value to a prospective customer and how
- Identify who we may be are competing against in delivering our service to each prospective customer and how we differ
- Engage with the prospective customer, qualify the opportunity, establish a network of contacts and build a business relationship
- Understand the needs of each contact within the relationship
- Define what company resources may be required to achieve a sale
- Demonstrate our service and gain buy-in
- Achieve X number of sales per period
- Define where, when and why sales were not achieved and how the business can learn from this analysis
Warning: KPIs should be used, and owned, by everyone in a business, not just the Sales Team, to inform decision-making, performance, and reporting. If as a manager you simply use them as ‘carrot & stick tools’ you’re lost in the KPI Jungle.
Remember, relate KPIs to your strategy [a plan of action or policy designed to achieve a major or overall aim] to establish context. Avoid directly starting at the tactical level [a small-scale action serving a larger purpose] because the recipient needs to understand how their accountability and actions will directly affect the organisation, then establish what they need to do to achieve the desired result.
The KPI Jungle can easily be navigated once you recognise where you are coming from and where you need to get to.
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