There are lots of rules and ideas around how to create KPIs for your business. Creating the right KPI will normally follow 4 steps as shown below.
Note: Every company is different and so are their drivers and barriers, therefore, the creation and appearance of meaningful KPIs will be different in most instances.
The Big Four
1. A KPI has to be simple
2. A KPI should be measurable
This almost goes without saying but I will say it anyway! You have to be able to measure the outcomes in a timely and accurate manner and share the results with the people that created those outcomes.
3. A KPI has to have a target condition and that condition needs to be achievable
The idea of creating a target condition that is impossible to achieve really makes no sense when driving improvements. It is far better to build in a stepped KPI range from the current condition to the target condition.
4. A KPI must be able to be impacted by the people being measured by it
This may be common sense but all too often KPIs are set to measure how people have carried out their role, yet some aspects affecting the KPI are not within the control of those being measured.
OK, so the above sets out the standard KPI ingredients and that is where this particular article gets a little different. Most small to medium enterprises do not have a KPI specialist or “nerd” sat in the office checking what ‘good’ looks like and how this particular KPI lever is impacting other areas of the business.
So personally, I feel there needs to be some additional points that should be considered when thinking about creating a set of KPIs for your business.
1. For a KPI to be meaningful, it must improve a problem
It is futile to create a measurement for something that is working and requires no improvement. The KPI’s that get the best results and traction almost always sit on the back of a problem statement.
e.g. We are seeing lots of returns due to clients not being present
The KPI could be:
(% of times the correct address has been input) X (The number of times customer attendance has been verbally agreed prior to order placement)
2. A KPI must drive the behaviours and values of your business
Suprisingly few smaller businesses have a set of values that are widely communicated. Your businesses values are one of the most important aspects of your enterprise. Not only do they inform potential clients about the level of service they can expect, but they also allow your workforce to work towards a common belief and behaviour.
By creating a KPIs that don’t reinforce and drive the values you hold dear, can be suicide for a business.
My advice when creating robust KPI is to think about, ‘How the work force try to get around this measure?’ and if that is contrary to your values, perhaps you need to revisit the KPI.