InsightofKPI

As a business strategy is more dynamic than ever nowadays, therefore, there’s no one size fits all, you have to adjust KPIs from time to time accordingly. 

You can only manage what you measure. The organization that didn’t have a systematic approach to measurement and analysis has a giant blind spot that is impairing its business performance and effectiveness. The selection of KPI is the tricky part & selection must be aligned with the objective. Here are some common criteria to select Key Performance Indicators (KPIs):

“SMART” Criteria for selecting KPI: This is a widely used framework to ensure your KPIs are effective. It stands for:

Specific: Clearly define what the KPI is measuring. Avoid vague terms and ensure they directly relate to your overall goals.

Measurable: You should be able to track and measure it over time using a defined unit (e.g., percentage, number, dollar amount). The KPI should be quantifiable. 

Attainable: Set ambitious but achievable targets for your KPI. However, unrealistic goals can be demotivating and discourage tracking progress.

Relevant: The KPI should be relevant to your overall business strategy and objectives, ensure it aligns with what you're trying to achieve.

Time-bound: The data used to calculate the KPI should be readily available and accessible in a timely manner. This allows for prompt course correction if needed. Establish a timeframe for measuring and evaluating your KPI. This could be daily, weekly, monthly, quarterly, or annually depending on the KPI.

Additional Criteria to improve KPI effectiveness:

Actionable: The KPI should provide insights that can be used to make informed decisions and take action. It should help guide process improvements or strategic adjustments.

Aligned: Ensure your KPIs are aligned across different departments and levels of your organization. This fosters a unified focus on achieving your overall goals.

Limited in Number: Don't overwhelm yourself with too many KPIs. Focus on a handful of the most critical metrics that provide a clear picture of your performance.

Balanced: Use a mix of leading and lagging indicators. Leading indicators predict future outcomes Here's an example:

Industry Standards: Consider relevant industry benchmarks for your KPIs. This allows you to compare your performance against competitors.

Stakeholder Input: Involve key stakeholders in the KPI selection process. This ensures the chosen metrics are relevant to their needs and areas of focus.

Imagine you're an e-commerce business and one of your goals is to increase customer satisfaction. Here's how you can improve this KPI using the SMART criteria and additional factors:

Specific: Track the Net Promoter Score (NPS), a widely used metric for customer satisfaction.

Measurable: NPS is measured on a scale of 0 to 10, with higher scores indicating greater satisfaction.

Attainable: Set a target to increase NPS annually.

Relevant: Customer satisfaction directly impacts customer loyalty and repeat business.

Time-bound: Measure NPS quarterly to track progress towards your annual target.

Additional Considerations:

As a business strategy is more dynamic than ever nowadays, therefore, there’s no one size fits all, you have to adjust KPIs from time to time accordingly. By following the above criteria, you can select KPIs that effectively track your progress, guide decision-making, and help you achieve your business goals.

Posted in: KPIs,Performance Master