Many supervisors and managers struggle with knowing how team members are performing relative to company goals. Since we are facing summer months, this might be a perfect time for you to revisit your goals to ensure you finish this year strong.
Most companies use some mechanism for goal setting. Sales forecasts and yearly business plans guide sales activity. Strategic plans clarify expectations and describe related individual or departmental contributions. These tools are helpful in clarifying expected outcomes. However, they tend to lack the detail needed to monitor performance and progress — critical for goal achievement.
Building Key Performance Indicators
Key Performance Indicators (KPIs) are an excellent way to evaluate progress on expected outcomes. Ask “What are the primary ways we/I can support the overall goals of the company/department?” “What are the accountabilities of this role/department?” A KPI is only “key” when it is a primary factor in reaching the desired outcome, or is a critical factor in the success or failure in reaching the goal. Therefore, not all objectives are KPIs. It is important to prioritize those factors critical or “key” to reaching the ultimate goal desired. In addition, be sure to limit the number of KPIs you select to keep everyone’s attention and energy focused on priorities.
Next, for improved clarity it is important to define each KPI. Choosing the right KPIs depends on clearly defining the results or outcomes expected. A goal of sales growth is useless as a KPI without describing growth. Is it growth of market share? Growth of sales over a previous period? Growth of new products? Another example, “Be the most popular company” lacks a clear way to measure the company’s popularity or compare it to others.
Next, determine how each KPI factor will be measured. Often managers say “I’ll know progress when I see it!” That’s not good enough. KPIs must be expressed in a way that can be measured by current company data or operation capabilities. In other words, ways you are able to accurately monitor and measure. Metrics will more easily identified by asking:
- “How will we know that this project was successful?”
- “How will we know that expected outcomes were achieved?”
- “What return are we seeking?”
Keep in mind, objectives and metrics will differ depending on who is measuring the performance. The KPIs useful to a finance team will be quite different to the KPIs assigned to the sales force.
Set targets or goals for each KPI. Creating new KPIs can sometimes be more difficult if you do not have data or history of tracking the information in question. Establish a baseline before setting new KPI expectations. I often recommend our clients set goals ‘just out of reach but not out of sight’ when goal setting. This helps make goals more practical and realistic — but still rooted in your own performance standards.
Building Effective Key Performance Indicators (KPIs):
- Determine objective or expected outcomes.
- Prioritize to identify top or “key” objectives.
- Define objective for improved clarity (Ask: If someone outside of our company read this…would they understand our goal?)
- Determine metric (Ask: How will we measure this goal? How will we know we are successful if we tripped over it?)
- Set goal (Ask: What is our baseline? What goal is appropriate? What timeframe is appropriate?)
How to use KPIs as a management tool
KPIs are used as a performance management tool. They give everyone in the organization a clear understanding of what is important, of what they need to make happen. You use that to manage performance. In addition, KPIs should be incentivized. Build incentives to reward those who are working to achieve Key Performance Indicators. This not only sends a powerful message about their importance, it also aligns company goals with individual efforts.
It is important to continually review and remind employees of KPIs to maintain focus on the expected outcomes. Some companies post KPIs everywhere: in the lunch room, on the walls of every conference room, on the company intranet, even on the company website. State each KPIs goal and show the progress toward that target for each. This will establish a company or departmental momentum as well as some healthy competition among team members or departments. This sends the message that reaching company goals is a team opportunity and challenge.
Author Anita Sirianni is a 25-year healthcare veteran. As president of ANSIR International, a company committed to coaching sales teams to excel, Anita works with medical and dental manufacturers and distributors to achieve peak performance. For information on ANSIR’s services visit www.ANSIRinternational.com or call (800) 471-2619.