With so much data available today, you may be tempted to measure everything. But for your KPIs, be sure you measure what matters–the strategic objectives that will help you reach the high-level goals of your organization. And, get the right tools in place to know the “why” behind your KPIs. Here are the ten steps for developing the right KPIs.
Define how your KPIs will be used. Be clear about who the audience is for these KPIs and ask them what they want to achieve and how they’ll use the KPIs. This will help you develop KPIs which map directly to their goals and strategy.
Tie them to strategic goals. Your KPIs must relate to what you’re trying to achieve in your business overall. While they may be related to a specific function like HR or marketing, every key performance indicator should tie directly back to your overall business goals.
Write SMART KPIs. The most effective KPIs follow the proven SMART formula: Specific, Measurable, Attainable, Realistic and Time-Bound. Some examples include “Grow sales revenue by 5% per quarter” or “Increase Net Promoter Score 25% over the next three years.”
Keep them clear-cut. Everyone in your organization should understand your KPIs so they can act on them. When people understand how they’re performing against a clear goal, they can make decisions that will move the needle in the right direction.
Have a mix of lagging and leading KPIs. Lagging indicators help you understand results over a period of time such as sales over the last 30 days. Leading indicators help you predict what might happen based on data, allowing you to make adjustments to improve outcomes.
Avoid KPI overload. You likely have access to mounds of data and a variety of tools which allow you to measure anything and everything. Steer clear of KPI overload by focusing on only the most impactful measures.
Get your data house in order. Accurately tracking KPIs requires accurate data. Bring together data from multiple sources across your business to get complete, accurate, and up-to-date information.
Know the “why” behind your KPI. Pick an analytics or BI tool which allows you to create interactive visualizations and dashboards based on your KPIs. This will allow you to explore and analyze the data behind your KPIs directly within the dashboard itself.
Stay alert and take action. Modern analytics and BI tools make it easy for you to set up data- driven, real-time alerts based on your KPIs. These alerts help you quickly respond to changes in your business. The best tools go further by enabling your key applications to work with your analytics and trigger automated, event-driven actions based on KPI changes.
Plan to iterate. As your business and customers change, you may need to revise your key performance indicators. Perhaps certain ones are no longer relevant, or you need to adjust based on performance. Meet regularly to review them, take a close look at performance to see if adjustments need to be made, and publish any changes you make so teams are always up to date.
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