If you and your team are working towards a goal, how do you know whether it’s the right one?
If that sounds like a silly question, it’s not. People often choose goals that sound great, but then fail to achieve their big objectives because they set the wrong goal.
How can you avoid that pitfall and move confidently towards your big objectives?
With Key Performance Indicators, or KPIs, which are simply the metrics that track your performance. Without the corporate speak, they are measurable indicators for your goal.
Types of Key Performance Indicator
There are many types of KPIs, from quantitative to qualitative, and you can choose any kind that work as long as they measure exactly how your performance compares to your goal.
For example, if your goal is to sell cars, the metric to reach that goal is the number of cars sold. If you are organizing events, the goal is the number of past events organized or the number of attendees to each event. If you are a teacher, your goal is the number of students who graduate your class.
Notice the KPI is the final goal you would like to reach—not an in-process measurement. In the car salesman case, the number of clients spoken to or the number of questions answered are irrelevant. When the goal is quantitative, the KPI only looks at the final result. When the goal is qualitative, your KPI will reflect an in-process measurement.
Why are Key Performance Indicators important?
Understanding your performance helps you evaluate it and make course corrections as needed to reach your big objective. Data about your process helps you know whether you are getting out of an activity what you are really looking for.
KPIs can prove to be the key to your success because:
- They hold the team accountable
- They keep people focused on the goal
- When you reach it, you feel accomplished and want to do it again
- They are a way to show trackable results and ask for more resources or support
Who should Implement KPIs?
Everyone. If you have work to do, you should have KPIs for it.
If you’re a singer, your KPI could be concerts performed or downloads purchased.
If you’re a plumber, your KPI could be the total sales.
On a personal or professional level, do you know what your KPIs are?
Key Performance Indicators vs. Metrics
Metrics refer to keeping track of a measurable indicator that you can compare over time, but notice they don’t necessarily relate to a specific goal, where a KPI is directly related to your goal.
There are endless metrics you can track for any given project, and some will impact your KPIs more than others.
Going back to the car salesman example, you can say, “I have sold three cars today, which is great!” Selling three cars sounds like a productive day (a metric), but how does it compare to the goal of generating $3, 000,000/month (the KPI)?
The KPI for a car salesman should be related to the monthly goal. In this case, it could be:
- Daily average cars sold price, and understanding what that average sold price should be to help you get to the goal
- Percentage of the goal that’s accomplished vs. sale days available to meet the goal
- Conversion rate: of all the clients that you talk to, how many are buying cars?
Notice these indicators are simple and encompass a lot of information at once, which makes the KPI a more effective indicator than just a simple measurement (metric).
Tracking Hourly, Daily, Weekly or Monthly?
Once you have selected the proper KPIs to lead you to success, you need to track them. Regardless of your activity, the more often you review your KPI, the more detailed information you will have to analyze and drive your strategy. Keeping a balance is key since you can reach information overload, and you still want to be able to compare your KPI to other daily/weekly/monthly performances.
The speed and size of your business determines whether you should review your KPI on an hourly, daily, weekly, or monthly basis. Every time you review your KPI, analyze whether the strategy you put in place worked for the better or worse. You will review the numbers, draw your conclusions, come up with an alternative, and implement again.
The process will look like this:
Step 1: Figure out KPI
Step 2: Implement strategy
Step 3: Measure KPI
Step 4: Draw conclusions
Step 5: Implement updates and start step 1 again
The length of this cycle determines how often you will review the KPIs, and then your data will drive your strategy, and the appropriate frequency will become clear on its own.
Driving your Strategy with your KPIs
It should be a relief to know that your KPIs will help you drive your strategy. You no longer have to make decisions based on opinions or intuition; you will use facts instead.
This means you need to know your numbers. When you look at a KPI, you need to know right away if it’s better than usual or not, and if it takes you closer to the goal or not. When you talk to your team, always make sure you frame your conversation around the KPIs.
Know what the KPI was when you used a specific strategy, how much it was last year, and so on. Data without the analysis is useless, so use it well and learn from it.
When someone brings a new proposal, make them estimate what they expect the KPI to be. This will become their goal and commit them to getting results.
Keep track of the performance within a dashboard, which is a control panel that will help you quickly determine your numbers. This doesn’t need to be anything fancy, but it can be. There are many tools available online to create dashboards, but if you are just starting, an Excel sheet will suffice.
Keep the dashboard consistent and review it often to draw conclusions and help you make decisions. Within the dashboard, you should be able to cross-check your KPIs with the strategies you implemented to help you review the performance of each effort. You should also compare all KPIs to determine if there is a relationship and see how each is affected by an implemented strategy.
Sharing your Key Performance Indicators
It is fine to share Key Performance Indicators—there is nothing secret about them. In fact, the formula to get these results is what makes you, not the indicator, unique. By sharing KPIs, you can compare yourself to market trends and other colleagues and better understand where you are in comparison to them. They can also compare themselves to you and together you can strive for better performance.
Nowadays, in the world of sharing and public information, believe me that sharing will bring back only good things to you.
The purpose of implementing KPIs is acting upon them to reach your goal. Your performance indicators are the ones that will drive you to success every time you analyze them. Review them carefully to find:
2) How your strategies affected performance
3) Conclusions for the next steps
Be true to your indicators and make decisions based on them. The KPI data doesn’t lie, so keep it simple and look at the facts when driving your strategy.