Few organisations operate without some sort of strategic plan, often one that has been derived from a strategic planning audit. Those that don't may find they soon go out of kilter as different wings of the organisation pull in different directions. To ensure all teams and individuals in your business are working toward the same strategic goals, you need to establish a series of Key performance Indicators, or KPIs.
KPIs must be measurable in some way or they really don't count. A goal that says service 'must improve', for example, is no good unless there is some metric behind it which you can count in a quantitative way. Customer service surveys might be the answer to obtaining these quantifiable metrics, even if the questions put to your clients are qualitative. The point is you need to set a benchmark for improvement within a time frame. Without doing so, who is to say that service has improved or not?
The role of key performance indicators
In order to measure your performance against the objective you have set for an individual or team within your organisation, you need to monitor ongoing progress. This is where key performance indicators come in, providing insight into where your performance currently is and the trajectory it is on.
Let's say that a business objective is to lower overdue debt from sales invoicing by 20%by the end of the financial year from its current level. A quarterly KPI report that shows a 5%reduction by the end of your first operating quarter represents an on-target statistic. Equally, a figure of 7%demonstrates that you are ahead of your target and one of 3% means you need to take additional measures to get back on track.
In other words, without KPIs you only find out if you have achieved your objective at the end of the given target period. KPIs mean you can keep on track of them and adjust your strategies accordingly.
The trouble with KPIs is setting them. Too much focus on one metric leads to inevitable slippage in others. When choosing which ones to operate with, make sure those you opt for:
- Are directly associated with your business goals and objectives, not secondary matters outside your main business plan.
- Are genuinely quantifiable and don't rely on a manager or an assessor making their own, qualitative value judgements.
- Can indicate both when you are ahead of your business objective as well as when you are behind it.
- Are the most important measurement of business success – too many KPIs trying to cover all the bases are as bad as too few.
- KPIs that provide insight into the key metrics associated for your sector, so you can benchmark your organisation against direct competitors.
- Take into account any operational changes that might negatively impact performance in the short term, such as restructuring programmes.
- Are not just financial in nature – even sales and marketing companies need to keep their eyes on other business goals.
Using Strategy And Performance Software
A good performance management and strategy suite can help you set the right KPIs to monitor success and progress in your business. To find out more about our software solutions and how they can benefit you, speak to a sales adviser on 0845 519 7662, or arrange a free demo by clicking here.