The case for having KPIs (Key Performance Indicators) for your business cannot be overstated. But beyond than just having them, it’s equally essential to create a cadence for your team to review them on a regular basis. After all, why plant the roses, if you’re not going to water them.
Much has been written on KPIs, and certainly much more thorough thoughts than this, but I was recently asked to lay out some thoughts on KPIs, their value, and their role in our business. So here are 3 key thoughts I derived for when you’re implementing new KPIs or reviewing old ones. (Hint, hint—we’re coming up to the new year…what better time than now?)
Ask an analyst to produce a KPI report and you may find yourself lost in a sea of stats, numbers charts, and graphs. Ask the CEO what matters and you’ll likely hear 3-5 points that drive the business.
The difference here is understanding what truly matters.
As an example, in the home service industry we’ve seen some clients break these truly KEY metrics down to just three.
Jobs, Technicians, & Trucks
We need the phone to ring, we need employees to complete the work, and we need a reliable fleet to keep the technicians on the road.
But what about effectiveness statistics, or seasonal changes? What about employee satisfaction and accounts receivable?
Yes, those too are important (sometimes VERY important). And yes, we will still track them. But the point here is to understand the true basis of what makes your business run.
So here I ask, what are the key 3-5 metrics that truly push your business forward?
What are the 3-5 Metrics you could not live without?
Is there clarity when the KPI is ‘off’?
I love stats, and I love reading into the numbers and mining out (my Minecraft-loving children are rubbing off on me) issues and solutions.
As you build out the report you will absolutely add additional metrics past those first few.
Some add color commentary, and others might add perspective. But if you’re not careful, soon enough you’ll have too many (we’ll worry about that in the 3rd point).
Consider this, though: is the metric clear? Do we have an absolute understanding of what winning and losing looks like?
Sometime we do. A revenue number, for example, is very clear: we are either on-track or off-track.
Customer satisfaction scores however might not be so clear. Sure there’s a goal…but are we actually failing? Or did we just have a misstep?
Two thoughts here.
For the metrics that are clear, ensure that every time you report the stat, you are reporting it right up against the goal.
If you really like spreadsheets, you can even color code the numbers Red or Green.
No questions here, you are either on-track or not.
With these numbers and with this clarity, it is very easy to understand when we need to address issues in the business. And that is exactly the point of the meeting.
On the other hand, what if it’s a little less clear-cut?
That’s when I like to rely on trending.
Either in the format of your report, or with some supplemental charts and graphs, we need to be able to see the trend line.
Customer satisfaction scores, for example: while we might have had a bad week, let’s look back at the trend line of the last few weeks. Are you generally going up? Or generally going down? Or was that one ‘bad number’ really just a blip on the radar?
Having this perspective might allow you to ‘see’ a potential problem but shelf it, keep an eye on the metric, and see if it’s a ‘real problem’ a little further down the line.
You have to value your time in these meetings.
With this epic brain trust at your disposal, are you asking your team to debate the potential issues around a blip… or are you using the time to understand real, key issues in the business?
Trending will help you keep that perspective and allow you to understand the effects of your numbers that might not be so clear-cut.
Are you using the information to understand issues?
Great, we’ve got some numbers to look at. The meeting is set and the charts are pretty. You’ve done it! Right? Well, not necessarily.
After you’ve identified your key 3-5 metrics and started to build out a way to track them, you’ve likely added additional metrics to the report.
These supporting metrics can add clarity or perspective. And all this is great.
But now you must ask yourself: do these metrics help me make decisions?
Once you review the numbers, you must be able to identify issues underlying the numbers.
Does this combination of metrics allow us to paint a picture of why the numbers are off?
Or more importantly, are the people in the meeting connected well enough to the work to understand what is driving the numbers?
Imagine someone handing you a book written in French. The info is all there…but it’s useless to you (unless of course you can read French).
Ensuring your team understands the numbers, how they were derived, and what they really mean will be crucial to using them to understand the issues.
Maybe we see that AR is too high. Ok, we’ll tell the accountants to get back to work. But did we also see that we just secured our largest account and they required NET 45 instead of NET 15?
Or maybe we see that our call center has been missing twice as many calls as previous weeks, but then you connect the dots and see the the labor line in the office is also down by half. Are we missing team members? Did something change in the call center?
The numbers alone will not tell the story of your business. You must have the right combination of statistics and connected individuals to read them in order to understand what is driving those numbers.
For this step, ask yourself this of each of your metrics: does this stat help me uncover issues in the business? Does this information help me and my team make decisions about how we will proceed?
Sometimes the answers to these questions will pare down your metrics board. And other times, that deeper look might help you uncover how 2 or 3 metrics are telling a story together.
In the end, be sure you are not ‘just reading the numbers.’ Your metrics review meeting should be a gathering of critical thinkers, brought together to get curious about the numbers and ferret out the issues. And… if it’s not… it might be time to shake things up.