Knowing your business goals is essential to Designing effective KPIs

Good KPIs should measure the things that will help you achieve your goals. It follows logically that before determining what to measure we need to know where we want to go. Does your business have a clear strategy? Is there a business plan? Are managers clear on how their team goals fit the plan?

If you can answer yes to all these questions then it should be a relatively simple job to list your business goals and articulate the things you need to do to achieve them. Once we know what needs to be achieved we can design a set of KPIs to help us manage the business to get the right outcome.

What if you answered no? Well, all is not lost, there are a few simple steps you can take to put something in place. Even if you answered yes it’s worth reviewing things. I’ve worked on a number of performance management projects that have had an initial false start and we’ve needed to go back and clarify business goals before determining what to measure.

A pre cursor to designing effective KPIs is being clear on what outcome you need in your business. What is your business strategy? What are your core objectives? So let’s think about setting some.

Setting a Vision

At a high level what do you want for your business, do you want to grow? Do you have a new market you want to target?

Take some time to articulate in two or three bullet points where you want to be in a years time, in two years, in 5 years.

You might be able to do this by yourself, but it might be sensible to discuss and brainstorm with your senior team. An external facilitator might be useful to run the process and to help challenge the team’s thinking.

What’s the current business situation?

Fine, we’ve got a vision, but chances are we need to go on a journey to get there, and we will need a plan. The first part of this is working out where we are now then we can work out what needs to be done. Let’s review the current landscape, both externally in the world where you operate, and internally within the business. There are two simple but effective tools to do this. The PESTLE analysis and the SWOT.

PESTLE helps us confirm the external landscape and scan the horizon for the things we need to be aware of and react to. In it’s simplest form, the PESTLE just involves brainstorming some lists

• Political
• Economic
• Social
• Technology
• Legal
• Environmental

You can learn more about a PESTLE analysis here.

Has this revealed anything new? Let’s double check our vision. Is it still ringing true? Update it if necessary. We can now look at our own business in more detail using the SWAT analysis

SWOT lets us look at internal factors, and like the PESTLE, it’s a structured brainstorm.

• Strengths
• Weaknesses
• Opportunities
• Threats

You can learn more about a SWOT analysis here

You can also find out more about SWOT and PESTLE analysis in episode 34 of The Next 100 Days Podcast.

What’s the journey we need to go on?

The SWAT and the PESTLE should be starting to tell us what we need to do well and do differently to achieve the vision. It’s useful to start articulating the journey on a route map. I like to use a sun ray diagram to illustrate this

Write the vision in the top right corner. If you can, add some success factors that tell us what good looks like.

The rings are used to give a timeline, usually a ring for each year.

Each segment represents an area of the business, these can be whatever suits your business best, if in doubt keep it simple and start off with these four

• Customers
• Internal processes
• Core Capabilities
• People

This starts to illustrate what needs to happen and when. Once you have a top level diagram it might be useful to have a further set at a slightly lower level, one for each key team in the business.

Remember determining what each team should do shouldn’t just be pushed down from the top, involve the key people in the team, they will be aware of opportunities that exist and obstacles that need to be overcome too. Cascading strategy and objectives is a two way process.

At this stage we should have a clear vision, some business goals and a high level plan to achieve them, these can be translated into business and team objectives.

Now we are in a position to start thinking about KPIs.

If you want to know more about setting business goals, or would like some guidance through the process, my company, Appleby Consulting, specialises in supporting businesses through this type of exercise, why not contact us for a chat?