How to use KPI’s effectively

KPIs are a really useful tool to understand and manage the performance of the business when used effectively, but how can you make sure that they are not just a box ticking exercise? 

Tie them to your strategic goals. Your strategic goals set out what you are ultimately trying to achieve as a business and your KPIs are a measure of that. If you are measuring something that doesn’t relate to your strategic goals, ask yourself why. It might be that you’re not measuring the right things (or it might be that you’re strategic goals need revisiting!)

Too often companies will define their strategy as one thing but their KPIs are measuring something entirely different. This is confusing for all stakeholders and won’t help the business achieve its ultimate goal.

Get buy in. Make sure that your team agree with the KPIs that you have defined, or better yet, have helped to define them. Establish what you are collectively trying to achieve and the best way to measure performance against that goal. Make sure everyone understands the measures and include them in personal objectives where appropriate to ensure that everyone is pulling in the same direction. 

Define how they will be used and who will use them. Measuring KPIs is only useful if the business uses them to understand performance and takes action to improve or course correct. If waste data is only reported in sales meetings and nobody attending that meeting has responsibility for waste, it is unlikely that anything will change or improve. 

Keep KPIs clear cut. Everyone in the organisation should understand what the KPIs are and how their role will contribute to successful performance. There should be one clear definition for each KPI so that there is no confusion later down the line as to whether success has been achieved or not. For example, if the KPI is revenue growth, be clear over the time period and whether it is total growth or Like for Like growth, for example. Don’t leave things open to individual interpretation. 

Avoid KPI overload. With lots of data available, it is easy to try and measure everything, but this can mean that the important learnings can get lost in the noise and your focus and energy could be used up on lower priority issues – when selecting your KPIs be sure that you measure what matters. 

Stay alert, understand the why and take action. Ensure that you are reviewing your KPIs as regularly as needed for your business. This might be monthly, weekly, daily or even hourly depending on the nature of the KPI and the pace of your business. Use analytics tools combined with experience and an ear to the ground to understand why you are seeing this trend. And take corrective action as quickly as you can. 

Plan to iterate. The KPIs you use today might not be the same one that you need in a year. Review and adjust on a regular basis. If you find that there are particular KPIs that you aren’t given much focus to, chances are they are not really “key”. Equally if there is a metric that you are asking to see week after week because it is giving you valuable insight into the performance of the business, this potentially needs to officially be classified as a KPI and treated by everyone else in the business as such. 

Face into poor performance. If your KPIs aren’t telling you what you want to hear, don’t be tempted to ignore it, massage the figures or explain it away to avoid difficult conversations. Use it as an opportunity to understand what’s going on in your business and to talk to your people about their thoughts and ideas on how to improve things going forwards.