ten key points for implementing key performance indicators (kpi's) or metrics

TEN KEY

for implementing

POINTS

Key Performance Indicators (KPI’s) Excerpts from Mistakes Millionaires Make, by Harry Clark

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The purpose of Key Performance Indicators

MEASURABLE

SUCCESS

for team members within an organization.

GUIDELINES

(“KPI’s” or often called “metrics”) is to provide

Most organizations operate without KPI’s.

An analogy of a business without KPI’s

would be similar to playing

basketball full-time without knowing

how to or being allowed to keep score.

How long would the game

to the players?

INTEREST

without scores be of

How

would the game be?

POPULAR

If you think about it,

if you don’t measure your performance

and contribution to the company

it is pretty much like playing basketball

without keeping score...

Let’s take the analogy

one step further

If no one knew the rules of the game and there was no

clarity about how to win, what would it look like?

One player might assume that dribbling the ball is

best and therefore bounces the ball repeatedly.

Another might think passing the ball is how to win

and therefore does nothing but pass the ball.

Yet another might think

hitting the backboard

with the ball is how to win.

You see, without clearly defined

it is hard for a team to be truly successful.

METHODS OF

DETERMINING SUCCESS

KPI’s that are well implemented create total

alignment of energy and an environment for success

for each team member and the team as a whole.

Having KPI’s allows all team members to feel

successful and to understand how their contribution

is directly related to the overall success of the company.

TEN KEY

The following are

POINTS

to understand about KPI’s

1

KPI’S

3-5

Each and every team member has three to five KPI’s.

Do not fall for the temptation to think

“I have 23 items that are important for me

to measure each week.”

Everyone in the organization from the receptionist

to the CEO must have 3 to 5 KPI’s,

NO MORE.

The KPI’s are generated from the bottom-up,

meaning that the CEO’s KPI’s cannot be any different

than the aggregate of those created for

all the other team members.

2

MEASURABLE

The KPI’s must be unambiguously measureable.

There cannot be any question as to what is being measured.

For example: Produce 30 widgets per hour Average 15% profit on projects,

Customer satisfaction score of 9.85 or greater, etc

3

TIME

BOUND

There must be definitive dates or timeframes

associated with each KPI.

For example, 2016 Average Employee Satisfaction

Score of 74/100, or Reduce A/R aging to 32 days

by November 15th.

4

PASEO PRINCIPLE

“What gets measured gets done” is very true.

It is vital that you consider in advance what

the potential unintended consequence might be of

measuring each KPI.

In some cases, if you measure one facet then

there may be more important areas that

will be detracted from

and overall performance will be reduced.

Make sure you are measuring

the most important functions for the organization.

5

PRACTICALITY

Make sure the KPI data elements are easily obtainable.

You do not want to spend significant time and expense

developing processes or systems to measure your KPI’s.

6

FORMULAS

AND

PERCENTAGES

One easy way to track KPI’s is to turn many numbers

into a single factor, percentage or ratio.

That way it is easy to track.

The A/R aging stated previously is a calculation,

and 32 days is easy to understand.

7 PROFESSIONAL

DEVELOPMENT

Consider encouraging each team member to add

one KPI as a professional development goal.

For example, enroll in MBA program by January,

start Toastmasters in February.

8

TIME CYCLE

AND

REVIEW AND

FEEDBACK

The best KPI’s have short cycle times.

This means how quickly they can be measured.

For example, “Average 6 calls per day” is more quickly

measured than an annual employee satisfaction score

The faster cycle times allow for

quicker process improvement.

It is important that the teams review the KPI’s and

discuss how to refine them to make them

more meaningful and challenging.

Remember, the idea is to make the team

function better and more successfully.

9

LONG

PROCESS

TERM

KPI’s typically take about 30-60 days

to fully implement and about six to eight months

for the teams to really get into them.

It will initially feel uncomfortable and odd

for some team members but after six months or so

they take on a life of their own and

changes the game of business!

10

EVALUATION

PERFORMANCE

KPI’s are helpful for use in periodic performance reviews.

Eventually, it is important for the KPI evaluation to have

some influence on income (whether bonuses or base pay).

Learn more by reading my up-coming book

Or by taking the

Entrepreneurial Risk Assessment Survey at

http://pathwaypartnersllc.com/

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