Erica Olsen, COO and Co-Founder of OnStrategy, explains what metrics to watch within your company and how to use them in your reporting to ensure that your strategic plan stays on track.
For more resources on building your strategic plan, view the Essentials Guide to Strategic Planning.
“Hi, my name’s Erica Olsen. Today’s Whiteboard Session will focus on using key performance indicators in your strategic planning process. What are key performance indicators? We use a bunch of different words: KPIs for short, measures, metrics. They are the scorecard part of your balance scorecard. So we’re just focusing on the measure itself and some best practices around setting them, what needs to go into them and how we use them.
So with that in mind, there’s three types of key performance indicators. This is a layman’s view of key performance indicators and measures and metrics. There’s hundreds of other types, but these are just some basic ways to think about how to find your measures. So one is just thinking about picking raw numbers. As an example, number of new customers, number of complaints, number of products sold, that type of thing. The next type of measure is a progress measure, and it comes in the form of percent complete. Very project-oriented, what percent complete is the item? And then the last type of measure is a change percentage or a directional measure. So increase in sales is an example over last period, so last month, last week, last year, whatever the case may be.
So a really important point that I want to mention is that these measures, of course, are associated with a goal. Whether it’s a department goal or a corporate goal, they don’t just stand on their own. There’s a set of actions that should be taking place in order to move these forward. Otherwise, we’re just measuring for measuring sake.
So with those three ideas, let’s look further at some other things we need to think about when we’re setting our measure. So after you’ve determined what the measure actually is, you need to determine the source. And one thing to think about, do you already have the data or is it new, so are you going to have to gather it or do you already have it somewhere? So a source might be your CRM system; on your progress stuff, it might be your project plan. For sales, a change metric, in this case it’s sales. It might be your P&L, your financial system. So where are we getting the data? I think it’s really important to actually include that note in your plan so you remember month over month what you’re calculating.
Frequency – some data we can’t get every month, so a frequency might be monthly. In this case, number of new customers – that might actually be weekly – quarterly, and then we have our sales. Of course, that would be monthly as well. If it’s only an annual metric, such as customer satisfaction, think about how you might get a monthly metric to track your progress in between the years as a proxy, if you will.
So kind of recapping for a sec – We looked at the example. We established the measure itself, the source – in this case, where are we getting the data from? – how often we’re getting the data; and the other item that goes with your key performance indicators is what is the target? What are we trying to hit? Okay? So that is actually the goal in place. We take all that data – and it’s the raw data that we’re collecting on a monthly or quarterly basis – and we graph it. That becomes our dashboard.
So I just wanted to show some different types of graphs here. On our raw numbers, we’ve got sort of a…just raw numbers, number of new customers in this case. We’re showing three months. A progress indicator is actually a snapshot; in this case, kind of looking like a gas tank, at what percent complete from zero to 100%, kind of a nice gauge, nice way to see that data. And then of course, change metrics are best displayed in a line graph to show progress.
In summary, if you have key performance indicators and you look at them on a periodic basis, you’ll keep your strategy on track.”