You’ve all heard the saying “what gets measured gets managed.” An oldie but a goodie.
The way a lot of targets and other requirements in business are measured are via key performance indicators.
Basically, a Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives.
Organisations use key performance indicators at multiple levels to evaluate their success at reaching targets.
If you’ve ever used KPI’s had to achieve (or not achieve) KPI’s or develop KPI’s for a team you probably have mixed feelings about them! There are generally two groups of people in any organisation who are affected by KPI’s. These are the people who have to achieve them (team members) and the people who use them for reporting and to measure performance (leadership).
Before I go any further – think about the KPI’s you currently use… are they actually driving the desired business results?
In any business, there must be a way to measure performance – but sometimes, the wrong metrics are being measured and this can lead to a lack of engagement AND achievement across the board. It can also drive behaviours that are counterproductive to business objectives. What do I mean by this?
I’ll talk from a sales results perspective; however, the same concept can be applied to most KPI’s and industries. Let’s say you have a KPI of # sales per week in a team environment. On face value, it’s a pretty logical KPI, however, if you are only measuring the end result with no measures for the behaviours or other inputs that drive the sales result (output), you may actually find that the KPI can drive unethical behaviours, poor culture and that other valuable skills decrease. This is particularly likely if you are selling high-value products or services, or where repeat sales/retention of clients or customers is important.
Ideally, you should also have KPI’s around interim measures which contribute to the overall sales experience and ultimately the result. By only focussing on the actual sales result – you have short term business objectives being achieved, however, your long-term goal of developing the skills of the sales team, customer experience and customer retention may decrease. Engagement across the team may also decrease as a “sales at all costs” culture can develop – with recognition of high sales achievement being the focus – regardless of whether the longer-term business goals are being delivered. Both quantity and quality should drive KPI’s in this sort of environment.
So how do you make sure you measure the right metrics?
Great question! Start by ensuring that your KPI’s are aligned with the strategic goals of the business, support the right values and behaviours and that any incentives include these. Then, remember that KPI’s aren’t set in stone – if they aren’t working, review them and make the necessary changes! Also, remember that recognition of team members along the way is important – KPI’s can’t be achieved without an engaged and motivated team to drive them!