Scenario #1:
So, I was at a client site. The CEO asked me to help his favorite sales professional to be more successful. “Go talk with her and see how you can help.” So, I went and sat down with her and the first question I asked was “How are you doing this year?” The answer was “very good.” “How so?” I asked. “Well, we have a lot more interest and so much more pressure than last year.” When I asked about her quota attainment, she explained that she does not have a quota, but just tries to do as much as possible. Ok, that is fine, but what about year-over-year performance then? She did not know and had no access to this kind of data, plus she overlapped with another sales rep who also worked her accounts so it hard to know what she was responsible for.
If you want to improve your team’s performance, both in quantity and quality, they need to know what the destination is and how success will be measured. It is that simple. Vague understandings of “what we do” and/or “the values of the company” is important, but that alone does not drive success.
Key performance indicators (KPIs) are a type of measurement to determine the level of accomplishment of a specific initiative, task or goal. It is important to note that one KPI often is the input into another. For example, customer satisfaction (as a KPI) may be one of several inputs into making revenue quota (another KPI). Without happy clients, you have no sales. There will be high-level KPIs and low-level KPIs. One may not be more important than the other, as they should all be correlated. While KPIs generally refer to the thing you are measuring, goals define the level at which the measured KPIs is achieved to satisfaction.
Scenario #2:
At another company, the CEO explained that while clients were generally very happy, they had had some recent complaints. "Can you figure out what is going on please?” When sitting down with the most senior support representative, I asked him some questions: “What are you responsible for?” The answer was customer satisfaction. I then asked, “How do you measure if your customers are happy?” The answer was that he received little complaints and he returned all inquiries the same day. Then I asked him, "How many customers do you have?" He did not know. He only knew the ones he dealt with (which were the ones that were calling him) and those are happy. But what about those that are NOT calling?
You can see the challenge here. Not only was the KPI lacking, so was the customer list. A KPI around customer satisfaction would have had goals that said something like “95% of all customers need to have at least a 4 out of 5 satisfaction rating, each quarter when the survey is completed by at least 1,000 people.”
KPIs are the input to ensure that the company's goals are met. These goals themselves need to be defined following the SMART model. (S for specific. M for measurable. A for attainable. R for relevant and T for time based.) Without clearly and professionally defined KPIs and goals, there will be ambiguity as to the achievements of the team.
So, why do you want to have KPIs? Here are the top 5 reasons:
Priority guidelines. Working on the tasks that come in, is entirely different than focusing on the items that influence the well-defined KPIs. With KPIs and rewards tied to them, people will better understand what is both urgent and important.
Transparency around performance. Without knowing what the organization intends to measure, there is no gauge as to team or individual performance, thus no ability to guide the team to improve. Teams relate and collaborate better when they know what areas require their energy.
Accountability. Numbers don’t lie! Answering the question accurately “how is it going” will be easy when the KPIs are clear. Making personnel decisions based on actual performance is simple. There is no more hiding and work will no longer be measured by the hours on the job or the number of emails sent in a day.
Engagement. People don’t want to feel lost and want to have a sense of accomplishment. When people know what good looks like, they will naturally try to achieve it; especially if there are rewards tied to performance.
Decision-making. This is logical. When you implement KPIs, you will automatically need to develop systems/processes to measure them. With this information, the business intelligence gained will allow management to make more informed decisions.
Too many entrepreneurial businesses are run based on the "needs of the day." Many have the opportunity to transform from having the business pressures dictate the daily activity, to driving the business performance they strive to achieve. Having KPIs, tied to strategic goals, is one important way to get there.
For those of you that have experience with KPIs, please share your answers to the questions below.
1. What was your most challenging KPI during 2017 and what made it so difficult?
2. How do you plan to use KPIs in 2018 at your company to drive improvements to performance?
Please share your comments with us. Thank you!