Fun Fact: Target practice is only useful when there IS a target!
Gather ‘round and let me tell you a quick story of the time I was a really great leader with a rock-star team and STILL screwed things up.
Back when I was in the corporate world, I had this one really awesome employee. (Actually, I had a whole team of them, but that’s for another story.) She was SO dedicated. SO committed. She went above and beyond and then-some to help our clients solve their problems and get what they needed. What more could you ask for, right?
Let’s make a pretty little list of all the things that went right, shall we?
I gave her expectations for how to deliver great client service.
And then I got out of her way - giving her the autonomy to do her job on her terms.
She had a natural talent for helping and problem-solving…a perfect fit for the position.
Clients loved her to pieces and we never got a single complaint about our service.
We had a great pulse on exactly what our clients needed because we provided such high-touch service, so we were able to make our products and services even better.
HOORAY FOR ALL OF THAT!
There was, however, an unfortunate shadow to all of the above goodness…
These mind-blowing support services we were providing were no longer profitable.
She was putting in SO much time to handle client issues, particularly for a handful of our super-needy clients, that it just wasn’t sustainable. And because she loved this work, she wasn’t complaining ... she was just being her awesome, rock-star self.
As her manager, it was my fault, because I wasn’t measuring how much time she was spending on each client. And because I wasn’t measuring it, she wasn’t paying attention either. And before you knew it, we had WAAAAY over-delivered and trained our clients to expect this level of service from us over time.
Have you ever been there? Sometimes the best of intentions get us into sticky situations.
So how do you decide what to measure in your business?
“KPIs” or “Key Performance Indicators” is just a fancy term for “what we’ve decided to measure”. KPIs are a set of metrics that you use to measure two important things:
1 - The ongoing health of your business in each of the main functions or departments of your business: Marketing, Sales, Operations/Fulfillment, Finance & Administration, and People (HR).
2 - Progress towards your strategic objectives (Usually, these will be your quarterly goals.)
Let’s dig into each of these buckets to take a closer look…
KPIs for the Ongoing Health of Your Business
When it comes to setting KPIs to measure the ongoing health of your business, less is more. These are going to be the handful of metrics you look at week-after-week to identify any areas of concern so you can take action. If you have 50 of them, it becomes way too overwhelming to keep up with tracking and assessing what’s going on. They are called KEY Performance Indicators for a reason...not everything gets to be a key.
So we recommend getting the list down to 10-or-fewer for your business. Now, that doesn’t mean each of your departments isn’t tracking their own, more detailed metrics that you can dive into when you need more information, but the top-level ones should be a lean, mean list of only the most critical measures that drive the bottom line of your business.
Every business will have different KPIs, but you might consider ones like Conversion Rate, Cost Per Conversion, Profit Margin or Customer Satisfaction.
These KPIs can be changed whenever you want, but after you’ve been using them for about 6 months, you should have settled in pretty well with a good set that can work.
IMPORTANT: Make sure each KPI has an owner and that they are being reported on and flagged for issues regularly (ideally, weekly). This weekly reflection will help you quickly determine whether you’ve identified the right KPIs to help you make decisions and move the needle.
KPIs for Measuring Progress Towards Strategic Objectives
Hopefully you’re setting quarterly or monthly strategic objectives/goals with your team and measuring progress towards those goals. These critical projects and initiatives are the ones that are going to allow you to be more competitive in the market.
Because if we only focus on keeping things going the way they are...well...it’s not good.
And so once you set your strategic objectives, it’s time to dig in and determine what additional KPIs will be required to measure progress towards those objectives.
For example, if you want to increase leads by 25% this quarter, you’ll need to add a KPI to your list for # of leads so you can track your progress towards the goal you’ve set.
This does 2 things:
It helps keep your team focused on making progress towards the objectives you’ve set.
It helps you see when something is going wrong (or right!) so you can pivot mid-quarter, if necessary.
If all you do is set your objectives, cross your fingers, and hope for the best, I can guarantee you’re not going to move that needle.
These KPIs only stay on the list until the objective is reached or until you choose to forgo working on an objective. So throughout the year, you’ll have KPIs that pop on and off your list...and that’s just fine!
KPIs Are Your Friends
It can be a pretty big shift to start measuring and reporting on results in your business if you’ve never done it before, but without them, you’re kind of flying blind.
And don’t try to do this all yourself...you need to give your team ownership of the KPIs for their departments if you want them to truly take ownership of their results. Otherwise, you’re just that weirdo over in the corner worrying over a spreadsheet by yourself.
You’ve got this. Just begin and give yourself the freedom to adjust KPIs as you determine what metrics are right for your business this quarter.
And if you need help with defining your KPIs, we have a program for that! Book a free call and let us know!