This week’s email contains thoughts on improving alignment by using KPIs.
One of the most challenging aspects of running a business is getting people pulling in the same direction. In other words, getting them aligned.
The challenge is in translating organizational priorities into day-to-day behavior in the trenches. There is lots of room for interpretation in the translation even when people agree, in principle, with the priorities. Or, “the devil is in the details.”
A well designed KPI can be immensely helpful in reducing translation interpretation error by bringing a level of clarity to expectations. If you are clear about what you expect and have a way to measure performance vis-a-vis that expectation (a KPI), the person or people doing the work can be clear about what is expected of them.
Designing a KPI is part science and part art. Ideally, they measure the right thing at the right time for your particular business circumstance — keeping your and everyone else’s eye on the “right ball.”
We’ve come up with the following guidelines for designing KPIs in case you choose to give them a try.
- A KPI should define what success is (it should answer the question, “when/how do I know that I’ve been successful?”).
- KPIs can be “complete or not” but generally are better if they include more detail (e.g., “upgrade delivered and adopted by X customers a quarter” might be a clearer measure of success than “upgrade delivered”).
- KPIs generally are also better if they measure continuous results (reflecting ongoing effort). That said, simplicity vs. complexity is important to balance. Have fun, be creative, come up with ways of celebrating KPIs that are consistently met!
- A KPI should be “Key” and have a clear business purpose (e.g., so that visiting eight customers a month might be better if the KPI included four of those eight visit leading to a renewal or expansion of business). Too many KPIs or KPIs that are not focused on meaningful business results will definitely impair focus and alignment.
- A KPI should be actionable by the person being measured (that is, they can act to affect the KPI).
- KPIs should be evaluated regularly for utility (business purpose, actionability, etc.). It is completely normal that they are revised and refined as time goes on.
- KPIs can also be categorized by whether they are forward-looking (predictive — like, for example, sales inquiries) or lagging (retrospective — like booked revenue). Although a longer discussion, a balance between forward-looking and retrospective KPIs produces the best business outcomes if the KPIs measure the “right things at the right time.”
Let us know if you have questions or want some help putting KPIs into play.