Thought Piece

Choosing your business's Key Performance Indicators can be tough. You might be looking at an empty dashboard right now, thinking 'where should I start'? Don't fear, here are some starter tips to get you over the first few hurdles in the KPI selection process.

DON'T BE A KPI PERFECTIONIST

Don't get caught up on getting it right first time. Your KPI dashboard is a live tool, it can be changed at any point. Your processes and priorities will change as you grow, so relax and just start. By using KPI data, you will quickly learn what works and what doesn't. If you don't start with something you will never learn how to make it better.

BREAK THE KPI QUESTION INTO TWO CHUNKS

I always aim to break the KPI challenge into two questions. Firstly, what should I be measuring and why? Secondly, how am I going to measure it?

By breaking it into two main questions, you will make getting started a lot easier. Concentrate on the first question to begin with. Free your mind from specific metrics and create a list of what would be meaningful for you to measure based on your business objectives.

WHAT SHOULD I BE MEASURING AND WHY?

My starting point here is always to ask why do I exist? Think of your main stakeholders, typically your clients and your shareholders. Then ask what are the one or two things that they expect from you? For example, your shareholders might expect you to grow sales and margin, whilst your clients expect you to solve their questions quickly and to a satisfactory level or build a product which makes their life easier.

After that, you need to consider the key things you must do in order to achieve those main goals. For example, to grow sales you probably need to have more meetings and calls per day, week or month. You are not measuring the end result, but you know that if you have more meetings and calls then you're more likely to grow sales.

You can add multiple leading indicators to your list at this stage, as long as each one has an obvious connection back to your main goal. I always prefer to keep this list small and focused on the most important things I am responsible for delivering. Having too many KPIs will dilute your team's focus, which defeats the point of KPIs.

HOW SHOULD I MEASURE THESE THINGS?

Having built your list, you need to think about how you are going to measure them. My best advice here is keep it simple. Some people love complicated metrics that might be great for planning or benchmarking, but hopeless for day-to-day management.

The metrics you choose have to be simple so your team understand and connect them back to the action they just took or are planning to take. The clearer the connection is, the better. Your measure will be more engaging and more meaningful to you and your team, which is what matters the most.

GET STARTED

So there it is, the key steps to get moving with business KPIs. Ultimately, you need to avoid getting stuck into specific metrics too early in the process and start by really understanding your business or team goals, then looking at what activities will help drive you towards that goal. Then you can start really thinking about how to measure those activities. However, avoid being a perfectionist as getting started with something is always better than nothing, and you can always iterate as you grow and prioritize change.


Carlos Cordal has fifteen years global experience in strategy execution and continuous improvement project implementation. He has extensive experience in the excellence model, business transformation, enterprise performance management, business process modelling and program management.

Banks are not charities. But they do calculate the lifetime value of the customer and they understand the reputational risk to themselves of the slash and burn exercises they are sometimes accused of.

That brings us to the role of the banks, so often the largest creditor and certainly the one with the most intimate knowledge of how a company is faring. We all love a stereotype and the heartless, faceless bank pulling the plug on sound businesses over a minor blip sits deep in the business consciousness. But not all banks fit this caricature. "We want to work with management of a business facing difficulties to help identify the issues and provide solutions to get them back on track," says a senior manager with a leading retail bank. "We can make the most impact when the problems are identified early. We are keen for management to be open with us."

Banks are not charities. But they do calculate the lifetime value of the customer and they understand the reputational risk to themselves of the slash and burn exercises they are sometimes accused of. Most solutions to business difficulties involve access to more funds and/or different products (hedging, leasing, factoring) and that all adds up to continued and profitable involvement for the bank.

A Repositioning Turnaround may mean divestment of a troublesome subsidiary. It may mean embarking on (yet another) cost-cutting exercise, including turning away revenue opportunities if they are not of a sufficiently high margin. It most certainly involves a first step of getting an impartial and pragmatic overview of what the problem actually is, from Turnaround Professionals who also know the kind of language with which to talk to banks. The moment you take this kind of decisive action, you're likely to discover that there's no crisis, no drama, only urgent action that must start now.

Peter Charles 2010