“Setting goals is the first step in turning the invisible into the visible” -Tony Robbins
In our last post “Three things to remember about KPI’s we discussed that you can have different types of KPI’s (budget, compliance, and the list goes on), there are various types of data (structured, unstructured, and human), and KPI’s change as your company changes!
So why do three things about KPI’s matter?
A KPI assists you in measuring your performance based on specific goals. This means you have to know what your goals are, if you want to create a useful KPI. After all, if you don’t know where you are headed, you’ll never get to where you are going.
To create your KPI’s you need to ask yourself “What are the goals?”
Now, that is easier said than done, right? In business, goals come from a variety of areas….
Profit, compliance, spending, safety, and customer/client satisfaction goals… And of course each departmentwill prioritize goals differently! Regardless, creating tangible goals is a necessary step to creating successful KPI’s.
It is the difference between something you want:
“I’m going to run a marathon”
AND an actual goal:
“I’m going to run a marathon next year in June in less than 2 hours and 30 minutes.”
Hence, a goal is something you can measure!
We have all sat in those meetings where we listen to everyone discussing what they want. We need to decrease cost and increase compliance. “GREAT, YOU WANT THIS, SO WHAT?!?”
So, you have to decide how you will measure your success! You may want to increase profit but if you don’t know what percentage you want to increase your profit by, then you can’t measure how successful you have been at achieving your goal.
It would be like saying, “I want a raise” but not saying how much. You could increase your personal profits by .0025% and it is still a raise, or you could increase your monthly paycheck by 5%. Which one is reaching your goal?
Knowing what specific measure indicates success will help you to evaluate how successful your efforts were.
Thus, if you want to decrease spending by 10% within the next six months, then you know exactly what your objective is and how you can measure your success.
Now that you have a goal and a tangible measure of success you have to decide how to implement it.
“This is the discrepancy between what you want, how you will evaluate it, and actually being able to do it.”
If you have ever been in a long meeting where everyone is discussing what they want to do and how they can measure it but no one never mentions how they will actually do it, then you can understand the pain of indecision!
Too often we sit in around a table drinking coffee and discussing the importance of implementing our “KPI” or new “goal” and too rarely do we actually decide on a concrete plan for reaching the goal. It’s like sitting on a roller-coaster where there is the up-and-down excitement that something big is coming, and then all of a sudden you stop dead in your tracks with NOTHING!
Thus, you have to decide how you will reach your goal by creating an action plan!
At it’s most basic level this is like a 1+ 2 = 3 equation.
For example, you want to increase profits + so you invest in a new marketing strategy = by (x) date your profits increase.
How you will govern the process?
You have selected a KPI, you know how you can measure it, and you even know how to implement it! GREAT!
This means you want to incrementally check the status of your KPI by determining how you will govern the entire process?
In the ideal situation you will have a system in place that allows you to:
- Create the KPI
- Input the data to measure the KPI
- Denote responsibility for the action plan
- Evaluate the process as time goes on
- Measure impact of actions on underlying KPI
The governing system you select will allow you to check back at stage 1, stage 2, and so-on-and-so-forth until the goal has been reached.
Consider that you have implemented a new marketing strategy and by stage 1 you expect to see a 5% increase in sales. If you have followed all the steps, you know your action plan, then the evaluation (through the governing system) will come easy and you can determine whether or not you are on track for reaching your goals!
The process of selecting your KPI’s is dependent on you determining what your goals are and how you will measure and implement the changes. Each step to the process is essential to creating meaningful KPI’s and making useful changes.
That said, I would say the most important step is the governing process…. If you never govern the process you’ll end up in an endless cycle of knowing what you want to do and never doing anything, eventually leading to your company’s demise!