What gets measured gets managed…

Do you have key performance indicators (KPIs) set within your business? Or do you struggle to know what you should be measuring or How to set KPIs?

Key performance indicators are critical to the success of a business. They are a measure that predicts future outcomes of performance. Without measuring key areas of the business, you will not have information you need to make informed or objective business decisions.

KPI’s drive progress and steer you in the direction of your future – and they start at the team level. As a business owner, the most important key performance indicator is that you have the right people in the right area and that they are doing the right job.

How to set team KPIs?

In order to start setting key performance indicators your team members should all have positional contracts. This will ensure that they know what their roles are and what is expected of them.

A positional contract should:

  • Describe the position / role
  • Outline what the role is responsible for
  • Who the role reports to and who reports to that role.
  • The tasks and responsibilities

When setting KPI’s for your team, think about six key tasks or outcomes that you want them to be measured on. You need a measure for every position because everyone needs to be reviewed.

Think about how they can earn bonuses in each position:

  • KPI 1 : Should cover the cost of their role plus profit.
  • KPI 2 : Is the achievement of KPI 1 plus more profit – this is Bonus Level 1
  • KPI 3: Is the achievement of KPI 1 and 2 plus more profit and is Bonus Level 2

Don’t be disillusioned that some jobs are hard to set KPI’s for. Within a business, everyone and every task can be measured and therefore managed. Here are some examples of KPI’s for different areas of a business:

  • Marketing: Cost per lead, average sale, acquisition cost, conversion rate.
  • Production: Is the delivery : In full, on time and in scope? Units produced, stock levels, delivery times.
  • Finance: Sales revenue, profit, cash in / cash owed, gross margins.
  • Team: Absenteeism, training, turnover of staff, bonus and targets met.

All KPI’s should follow the same format of setting goals: SMT (Smart, Measurable and Time specific)

By including your team in setting their own KPI’s they will have more ownership of the goals and objectives.

Key Activity Indicators (KAIs)

Once you have 6 KPI’s for each team member, it is best practise to then work with them to identify what the key activity indicators are. These will then provide a strong structure and plan for achieving the KPIs. It also helps to break down the process to see which activities impact and drive the others.

For example, if it is to increase number of leads from LinkedIn, what are the key activities that you need to be doing to achieve?  For example, writing one article a day, commenting on X number of updates, direct messaging X number of connections.

Without the key activity indicators being set, you many find that the key performance indicators may not be achieved and lose focus. 

If you need help understanding key performance indicators for your business and team, or need help implementing them – get in touch.