This guide on selecting KPIs is part of the strategic planning process. Are you done (or close to) creating your goals? It’s time to select which ones will be your Key Performance Indicators.
What are Key Performance Indicators? We use a bunch of different words—KPIs for short, metrics, measures—they are the scorecard part of your Balanced Scorecard. Here is a quick analogy: If you were in the middle of the ocean, stuck in the doldrums of the equator zone with no wind, no power, no visible landforms you might feel at the mercy of your environment. Skilled navigators, however, know where they start from, know where they want to go and keep track of their speed and direction along the way.
Thinking of your strategic plan as a map to reach your organization’s vision as a destination has the same kind of absolute orientation power. It creates a destination for everyone in your organization to reach. The strategic planning process clearly identifies where you are starting from as well. Keeping track of your plan’s speed and direction is the role of the Key Performance Indicator (KPI).
KPIs offer a way to assess the direction and progress of your plan without having to review every single goal and task associated with your larger objectives. It acts as a dead reckoning navigational system. In setting your KPIs, identify the top seven to ten goals and associated measures that are most important to your company and stay oriented to the larger intent of your strategic plan. (Pictures courtesy of Wired 2010)
How to Select KPIs with Your Team
In preparation for leading a session to set your KPIs, ask your team to watch “How to Develop Key Performance Indicators.” Schedule a 2-hour meeting to address the following for each corporate goal. If all the criteria are met, select the measure as a KPI:
• The target and measure articulate the desired outcome of the goal.
• Target is quantitative, not qualitative.
• Data source is identifiable.
• Data can be collected at about the same frequency as the reporting cycle.
• Indicate the health and progress of your strategy.
The Bottom Line
• People care about outcomes not outputs. Think about the WHY as you develop measures.
• Focus on quality over quantity.
• Staff cares about empowerment and seeing measurable progress. Shorten time-lines where possible.
• Use a combination of leading (warning buoys) and lagging (history lessons) indicators.
• Use a proxy or a qualitative measure when collecting the data is more of a hassle than it is worth.
• Expect your KPIs to change as you start using them.