KPIs, monitoring, strategic execution KPIs, monitoring, strategic execution

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KPI's: Do's and Don'ts to reach your goals.

KPIs, monitoring, strategic execution

The performance indicators an organization chooses to use can make or break the operational processes.

KPI's: they are an essential part of strategic execution or programme management. Measuring your performance is the best way to evaluate to which degree you’ve realized the goals and ambitions of your organization. 

KPIs also offer important information that you can use to adjust your organization’s course and respond effectively to external trends and developments. 

So it’s obvious that KPIs are important – but they can also be confusing. There are different types of KPIs and the indicators an organization chooses to use can make or break the operational processes. This list of do’s and don’ts ensures your KPIs contribute to a successful realization of your goals.

Do: use a mix of lagging and leading indicators.

KPI’s can be broadly subdivided into two categories: leading indicators and lagging indicators. Leading indicators are indicatoren that help you predict future results. These indicators themselves are not directly linked to the goal, but they do indirectly contribute towards its realization.

Suppose your company wants to organize a large publicity event and attract 3000 visitors. You can choose leading indicators that measure your efforts (how many flyers have you handed out?) and leading efforts which measure the results of the efforts (how many sign-ups did you get?). Both of those have a predictive value for the final goal: the number of visitors at your event.

Lagging indicators are typical result indicators, which tell you whether you have reached your goals. They tell you how you are performing. These measurements are directly linked to your goals: companies will often use lagging indicators like profit or customer satisfaction to determine whether ambitions have been realized. Lagging indicators are very useful to communicate to stakeholders or steering groups what impact your strategy has delivered. However, unlike leading indicators, they can’t tell you much about developments for the future. A healthy mix of leading and lagging indicators gives you the best range of information to guide your strategic execution.

Don't: use too many KPIs. Less is more!

One common mistake when selecting KPIs for an organization is monitoring way too much. That doesn’t just lead to reporting stress for your team leaders, but also results in your steering group being completely overwhelmed by an avalanche of information. It’s better to keep it small and only select KPIs that are really relevant to clarifying your organization’s goals. Different KPIs can be relevant for different levels of the organization: you can have KPIs on a strategic level for the management team; a maximum of twelve KPIs per process; and just a few KPIs for the teams within each process. This way, everyone can keep up and steering groups won't get lost in endless meetings discussing lists of 30+ KPIs.

Do: use leading process indicators.

Process indicators are leading indicators that provide information about the degree to which a process is running successfully. Think, for example, "the amount of time between a customer complaint and its resolution." Process indicators have a powerful predictive value for the final results, because they can pick up on delays and imperfections in your processes. Using these, you can map your processes, locate problems and improve your performance based on a clear diagnosis.

Don’t: measure performance with KPIs that are (largely) outside of your control.

The very most important factor that makes a KPI useful or useless as a lagging indicator is manageability. That is to say: a KPI that your organization cannot influence may be useful as a predictive leading indicator, but never as an indicator of your organization's performance. Think of a local government selecting "the number of welfare applications" as a performance indicator for an employment programme. The coronavirus crisis may well have led those applications to triple overnight - but that definitely doesn't mean the programme wasn't achieving meaningful results!

Do: use lagging perception indicators.

A good KPI is specific and measurable. But that doesn't mean you have to restrict yourself to 'hard data' like time and money. Perception indicators are lagging indicators that provide information about the subjective experience of your customers/users/citizens. These can yield very valuable data about the results of your efforts. Don't just measure how many people are using a service, but ask them if they're happy! That can help you understand your results better, and if you're lucky, you'll receive some qualitative suggestions to improve your products or services. Because many companies tend to drown their customers in generic feedback requests by e-mail nowadays, you should ask for feedback in a creative, personal or fun way to raise the response rate.

Don’t: evaluate all KPI’s in the same cycle.

A KPI always has a monitoring frequency: how often do we measure this result? Different parts of the organization can benefit from different measuring frequencies. A customer service desk or a coronavirus dashboard might want to track results from week to week, while the performance of an R&D department really needs to be measured on a different time scale. Don't opt for a one-size-fits-all evaluation cycle, but choose a dynamic and automated process with measuring moments that fit the relevant department of your organization.

Do: think in process chains, not in islands.

When you're selecting KPIs in a large organization with different business units or departments, it's important to check the alignment of their KPIs. If they are not aligned, conflicts might arise. You might see, for example, a logistics department asked to save costs with just-in-time processes, while the same company's brick-and-mortar stores are evaluated based on their ability to deliver sold-out products to customers rapidly. Or a local government might try to simultaneously cut staff costs in the communications department as well as raise the average response speed to citizen inquiries. When you're selecting KPIs, then, it's helpful to look at the whole process (and other processes interwoven with it), rather than limiting your gaze to the individual department. That way, you can prevent conflicts from arising and have your organization run more smoothly.

Bizaline: First Aid with KPIs.

Want to learn more about how we can help you set up the perfect KPIs for your organization?
Send us an e-mail at info@bizaline.com!

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