How to properly use Key Performance Indicators (KPI)
Chances are that you already know what Key Performance Indicators (KPIs) are, and you already use them, or at least that is what you think.
KPIs are how we measure success or lack thereof. They are key to help decision-makers make informed decisions that contribute to meet strategic objectives. Without KPIs, success or failure comes as a complete surprise. KPIs must be SMART, most know that. SMART means they must be specific, measurable, attainable, relevant, and timely. There are variations to the above acronym, but that is the one I use.
But it is an easy claim to say “of course I use KPIs”, but not so easy to prove. If you really are using KPIs to get any benefit out of them you should answer with a “YES” to three simple questions,
But first, to get full benefit from this post, I would advise you to take this one-minute poll to know the answer, then continue reading this post to make the best use of your KPIs.
So, back to the questions:
- Is your KPIs data readily available to look at NOW?
- Is data up to date (not more than one month old?)
- Are they part of your weekly meeting agenda with staff?
If not, you are missing out on a huge growth opportunity. Managers find it difficult to really use KPIs because they do not know how to:
- Make them measurable
- Tie them to the strategic objectives
- Get people’s commitment to the KPI targets
- Measure KPIs objectively
- Keep them up to date
- Communicate them and discuss them with key stakeholders
- Access them easily and readily
- Understand what a KPI is
- Select the right KPIs
- See insights from KPI data
Do not neglect using tools
Today, we are lucky to have the technology that allows us to identify, collect, and analyze data more and faster than ever before, yet many companies are falling behind on KPIs instead of becoming more advanced.
Here are the top ten most common mistakes managers make with KPIs:
- They do not tie their KPIs to their strategic objectives and the organizational strategic objectives
- KPIs are not measurable in an objective manner
- You did not tie per KPI to one accountable person.
- Your KPIs are not readily available (meaning you cannot show me the KPIs in 10 seconds or less)
- KPIs are not easily understandable
- Successes are not tied to KPIs
- Performance review is not tied to KPIs
- KPIs are used as a judgment tool instead of being an opportunity to learn and improve
- KPI owners blame external factors for not meeting targets instead of looking for new ways to meet the targets despite the external circumstances
- Managers cannot describe the desired outcomes wanted, and cannot tie them
For your KPIs to succeed, Make sure to:
- Make sure you measure desired outputs as well as inputs that lead to the desired outputs.
- Let people set their own KPIs and tie them to organization objectives
- Make sure they measure what matters.
- After employees set their own KPIs, managers must ensure they meet their expectations, and they achieve strategic objectives
- Their has to be a “handshake” between manager and employee on the KPIs
- Make your KPIs measurable.
- Review KPIs weekly with each employee. If not possible, make sure to do it at least once a month
- Each team member must measure his own progress and report on them weekly and discuss them with his or her manager
- Manager if KPI is met, should encourage team member.
- If KPI is not met, the discussion should be around whether the KPI is achievable and what needs to change so the team member can achieve the KPI. The manager should avoid passing judgment on employee or being negative.
What is not measured cannot be improved. KPIs allow you to measure progress towards goals. If used wisely they being an amazing level of focus to the organization.