The 5 Critical Keys to Setting Powerful KPIs

With the growing pressure on businesses, people are working 9, 10, 11-hour days – powering through lunch, typing out reports with one hand while rummaging through a Fattoush salad with the other. Team members have missed birthdays, meals and exercise to try and reach their yearly goals, and yet, is your business truly better served?

What metrics (besides revenue and profits) are you utilising to predict how well your company will do at the end of the month, quarter or year?

The Role of KPIs (Key Performance Indicators)

Key Performance Indicators (or, KPIs) are trackable metrics which show how well a business is moving toward its goals. These numbers should tell you, in one look, the state of the company, the challenges that are ongoing, and the results you can expect in a week, month or even a quarter.

Stephen Hawking, world-renowned scientist & astrophysicist said “The universe is in a state of constant motion. It either expands or it contracts.” The same dynamic nature exists in business… the trick is identifying the change early enough to capitalise or make corrections.

As SME owners seeking explosive, lucrative growth, we need to look in the mirror and ask: is this the fastest, most sustainable way to:

•          Scale revenue

•          Decrease unnecessary expenses

•          Increase the results of each member of the team

Tracking these is the common aim when setting KPIs, yet most won’t hit the mark because setting and keeping great KPIs requires immersive, consistent and thoughtful work.

And we all know ‘busyness’ is a lot easier than business.

But, here’s the benefit: Truly effective KPIs should allow you to look into your business and, at a glance, say “If I stay at this speed on the current course… here’s where my business is heading, and here’s how long it should take me to get there.”

Since every business is unique in its strategic goals and how they wish to pursue them — we’ve put down the 5 key characteristics any powerful KPI should have.

5 Characteristics of Powerful KPIs

Simplicity

KPI’s must be easy to understand.

The best way to create crystal clear objectives for your team is to try and limit yourself to a 5-7 word description of a metric.

Remember KISSS: Keep It Short, Sweet and Simple — this will make it easier for your team to digest, and encourage you to focus in on what your business really needs.

Based on Valid Data

You can’t fix what you don’t track.

Set your KPIs only on the basis of what you can accurately measure. The system of collecting valid data doesn’t need to be complicated or overly-sophisticated, it just needs to be able, reliable and especially, accurate.

Bad data can be worse than none at all — which is why it’s critical to ensure you have proper systems in place to collect valid and usable information moving forward.

Context

What do these numbers mean?

We touched on the importance of setting clear, simple objectives (that is, clarifying the ‘what’). Context clarifies the ‘why’, helping us understand what hitting these targets would actually mean for our business.

Without context for you and your team, your KPIs have no specific meaning. Especially as it relates to how these metrics play into your short + long term goals, and whether the figures in the spreadsheet tell a story of expansion or contraction for your business.

Empower Users

Achieving KPI’s will likely make the business better and richer.

But what exactly is the personal/professional benefit for the people who helped the company reach this new level of success? Beyond their basic compensation, what incentive do they have to go the extra mile?

Psychologists studies have proven that people act most powerfully in their own self-interest. Tap into this part of human psychology and use it to fuel your business’ success.

Answer the innate silent question of WIIFM ‘what’s in it for me?’ — and supercharge your team by linking their benefit and progression with that of the company.

Audit

Business is dynamic.

Every so often, it’s a good idea to look around and ensure the indicators are still pointing us in the right direction. KPI Audits with necessary tweaks can keep your KPIs relevant — guiding your company’s workflow and business decisions along a successful path.

Look up, check your target, make sure you’re still on track to hit it.

Bonus Coaching Tip on KPIs: While too few can make you ignore key areas for growth, too many can bring confusion regarding where the team should most focus their energy. The key is balance. Every objective must have a strong, clear and unique purpose to exist.

Next Steps

If this seems like a lot (which it can be), or if you aren’t sure if you’re on the right track, let us be an extra pair of eyes. Get in touch and quote “Free KPI Review”, and we’ll arrange a quick session to go through what you’re currently tracking, what you should be tracking, and the most powerful KPIs for your business.

It could be worth the few minutes.

Happy Planning!