Measuring what Matters: Identifying KPIs for Improved Performance

Every company has a purpose to achieve something(s), and on that journey, several goals and objectives must be realized per time, hence, the need for KPIs. For effective performance management, monitoring individual and organizational activities helps a business keep track of its progress.

Have you had questions about how you can effectively measure what matters in your organization using KPIs?

Have you struggled with appropriately aligning KPIs with your organization’s goals and objectives?

Say no more. In this webinar with Adaora and Sodiq, your most pressing questions about using KPIs effectively were answered.

In this webinar, several aspects of using KPIs were discussed such as:

• Overview of performance management and understanding KPIs
• Identifying Relevant KPIs and common mistakes in selecting KPIs
• Aligning KPIs with organizational goals and objectives with examples

KPIs are a crucial measure of a system. They are important indicators of progress or lack thereof, in line with a specific goal. This could be measuring the cost per new hire y the HR of a company, or the hours of resources spent on sales follow up by the sales department of a business. KPIs are necessary in making decisions in every business organization.

What do KPIs do?

• Outline and measure your organizations key outputs.
• Confirm whether progress is being made against your strategy.
• Represent key elements of your plan that show what you want to achieve by a certain timeframe.
• Measure quantifiable components of your goals and objectives.
• Measure the most important leading and lagging measures in your organization.

Every organization needs a maximum between 5-7 measurable, outcome-based statements that can be used to track goals or objectives. The basic structure of a KPI takes the following form:

1. A measure: This refers to the metric that is to be tracked. For example, the number of new customers can be a metric to track.
2. A target: This is basically a number e.g. 1000 new customers.
3. Data source: This could be a CRM system an organization uses.
4. Reporting Frequency: This is the period that the indicators are always tracked e.g daily, weekly, monthly etc.
5. An owner: This refers to the direct stakeholder or staff interested in monitoring the performance of an indicator e.g. VP of sales.

Two major KPIs are necessary for every organization to track always. They are:

• Leading KPIs: These types of KPIs predict change or movement in your organization and tell you how your business might/will perform in the future. They do not reflect final outcomes. For example, in a logistics company a very important KPI to measure the cost to deliver a good/ service. If the cost of labour increases, it will give you a leading indication that you will see an impact on net profit or the cost of inventory.
• Lagging KPIs: These reflect the past outcomes of your measure. For instance, EBIT (Earnings Before Interest, Taxes and Amortization, reflect your earnings for a past date.

In aligning KPIs with your organizational goals and objectives, it is important that you emphasize the ‘line of sight’ to your teammates or employees working towards various goals. This will show them how what they do contributes to the organization. More importantly, the need to understand the organizational goals, rank the goals, identify relevant KPIs, setting clear targets and regular reviews are important in measuring what matters for your organization.

In conclusion, common mistakes in selecting KPIs and tips in ensuring you identify relevant KPIs were discussed at length. Also, Sodiq demonstrated how everyday tools can be used in monitoring KPIs, using HR information as a case study, so do catch up with the replay above.

Till next time