Are you working with kpis but not seeing the benefits you were promised?
Or are you just getting started with KPIs and don't know your way around? Don't sweat it!
We're here to uncover some of the most common mistakes organizations make when working with KPIs to help you get them right.
Before we dive in let's take a look at what KPIs really are.
KPI stands for Key Performance Indicator. KPIs are an essential ingredient for an organization's sustained growth.
Organizations and teams use them to measure the performance of ongoing efforts and activities that are key to their success.
These are all the activities you'd need to monitor and measure on a continuous basis
to ensure you're keeping the lights on — that is your business as usual.
If you're looking for a deep dive on KPIs check out our KPI online guide. You'll find the link in the description below.
KPIs have been around for decades and tons of organizations across the globe use them but they're often misinterpreted and used incorrectly.
That means many organizations aren't experiencing the true impact kpis can have on their business's success
So having helped thousands of organizations implement and master the use of KPIs at Perdoo I'll share the top 6 mistakes to avoid.
While KPIs help measure and track the ongoing performance of key areas of your business they're
also a critical gauge to understand how you're progressing toward your strategy and realizing growth.
Therefore not reflecting on your strategy and growth ambitions when setting KPIs can result
in having a bunch of metrics at hand that have little to no impact on your business's success.
Your strategy is the single source of truth — it provides overall direction for your entire organization
answering critical questions like what the purpose of your business is,
where you need to go, and what you need to do in order to be successful.
Your strategy isn't time-bound and since KPIs don't have a due date (unlike OKRs)
they're the perfect type of goal to measure progress toward your strategy.
In Perdoo you can align KPIs to strategic pillars to actively monitor and visualize your strategy execution efforts.
On the other hand, your growth ambitions, for example Monthly Recurring Revenue (MRR) and
Lead to Customer conversion rate are the metrics that are going to lead your organization forward.
These are best represented as KPIs.
If you don't focus on your growth ambitions and your strategy when deciding KPIs for your business,
you run the risk of missing out on the key part of KPIs.
Our day-to-day is already inundated with tons of data and information.
It's often tempting to measure everything or the things that are easiest to measure,
but is all that information key to your team and organization's ongoing success?
Probably not.
The danger with translating all the data points that your teams and organization interact with is that you lose a sense of focus.
And ultimately the metrics that truly matter get diluted in the mix.
For that reason, it's important when setting KPIs to have those difficult conversations.
Ask yourself and your team: do you consider the overall organization and/or certain areas of the organization healthy?
Why or why not?
If not, the metrics to nurture it back to health should be reflected as KPIs.
If yes, those metrics that tell you the things that are healthy should be reflected as KPIs too.
At this point, you may even have too many kids. don't avoid the hard choices on what's key and what isn't.
In the next screening process, ask yourself:
Is this really reflecting our most critical business as usual, and is this really a metric that we need to be looking at regularly?
Once you have your answers reflect those priorities as KPIs.
Your KPIs are your window into understanding how various parts of the business are doing — they're your health metrics.
When these areas aren't progressing as intended it's crucial to take timely action to ensure your business stays on the right track
Here's where Objectives and Key Results come to the rescue.
When a KPI is unhealthy or you've set a new target to take it to the next level you can create an OKR to improve your KPI.
Such OKRs put the health of the KPI front and center, enforcing you to prioritize the efforts needed to achieve your target.
In Perdoo you can uniquely align an OKRs to a KPI to help communicate the
specific efforts being made to achieve the KPI's target.
When viewing a KPI you'll also have historic reference to all the past aligned OKRs (if any) to see what worked and what didn't.
There's a treasure trove of industry and team-specific metrics as well as target benchmarks available on the internet.
They're a great place to get inspiration from, but it's important to
keep in mind that what works for others may not necessarily work for you.
So do your research to get a feel of what other organizations and teams similar to yours are doing,
but then sit down with your team discuss what it is that's essential for your success.
And then reflect those priorities as KPIs.
At this point feel free to refer back to the questions in point number two.
The same goes for targets. Use industry benchmarks to orientate yourself but then set targets that are achievable for you.
Circumstances always change, your forecasts and priorities may shift, or you may simply want to raise the bar higher.
So reflect these adjustments in your targets to make sure you're continuously advancing toward your desired destination.
In Perdoo you can now add monthly targets to communicate those changes or advancements over a longer period of time.
We've found that ownership of KPIs is a gray area for many organizations.
Should it be owned by a team? An individual? Or should it even be owned by anyone at all?
Well when no one is responsible for a KPI you risk uncoordinated and inaccurate measurement.
There'll be a lack of accountability and if everyone, for example an entire
team is responsible, then you run into the risk of diffusion of responsibility.
As the saying goes "If everyone is responsible, no one is."
It's essential to make a single person responsible for a KPI.
That person is called the "lead."
That doesn't mean that the lead is the only one working on the KPI but instead having that one person responsible
centralizes accountability, putting them in charge of communicating what's needed to keep it on track.
We found that too many organizations track their OKRs in one place, while their KPIs are scattered
across several different tools.
You've got KPIs to monitor your business as usual work and the core responsibilities of each area of the business.
But what about the goals that will actually help you execute your strategy?
For that many organizations use OKRs.
KPIs alone only tell half the story.
Combine KPIs with OKR and you have the entire picture.
Tracking them alongside each other provides you with full transparency into the priorities of each area of the business.
When these goals are scattered across multiple tools or even in a separate section of the same tool,
for example on multiple spreadsheets, it leads to misalignment and a lack of clarity.
Well first things first: avoid making these six mistakes.
But most importantly don't forget that your KPIs are that window into your organization's health
and the ongoing processes that keep the lights on.
Set KPIs that best reflect your business's priorities.
Have the tools to ensure they're leading you down the right path and keep them flexible.
KPIs aren't set in stone, priorities change and so do circumstances.
Revisit and adjust your KPIs or their targets as needed.