13.08.2018

Four rules to build KPIs that make sense !

KPIS enable managers and employees to assess the effectiveness of their actions. They are related to the objectives and strategy of the company : KPIs can facilitate the decision-making process. But how to give meaning to these indicators ?

KPIS

The implementation of effective Key Performance Indicators (KPIs) is one of the main concerns of large companies. What indicators, then, to develop ? How to navigate among massive amounts of data available  ?

 

In this new article, you will find :

 

  •  Why is there a need to establish KPIs for the success of your business ?

 

  • What techniques are being used to set up your indicators ?

 

  • How to use KPIs as a tool for sharing information among your employees ?

 

Peter Drucker, considered to be one of the founders of Modern Management, said :

 

You can’t control what you can’t measure.”

 

You cannot index your success without setting goals and defining a clear track.

 

 

KPIS, KEY TO SUCCESS IN YOUR BUSINESS

 

What is a KPI ?

 

Definition : A KPI is a performance indicator for your business. This indicator is therefore encrypted and allows you to track the effectiveness of an action against the defined objectives. A KPI can take different forms: growth in turnover, absenteeism or market penetration.

 

The two key performance indicators :

 

There are usually two types of indicators within teams. The former is in close connection with the activity of the service or company – activity metrics.

 

Some examples : the number of employees trained in new working methods, the number of products released by the Research & Development department over the first six months of the year.

 

The second category of indicators concerns the effects of your actions on the market – impact metrics.

 

Some examples : your market share in a given category of products, the sales within your e-commerce site or the churn rate at your service.

 

DEFINING YOUR KPIS: MANDATORY STEP

 

KPIs

 

 

KPIs are useful for all businesses in a company. They are the first step to manage your activity, evaluate your competitive positioning and identify areas for improvement.

 

Step 1 : Determine the needs to which they respond

 

Example : I need to analyze my sales throughout the year.

 

Did my sales increase over time ? Do I want to compare my current sales against the same period the previous year ? Do I want to view details of my sales on a product-by-product basis or do I prefer to see the performance of my salespeople on a case-by-case basis ?

 

Upstream thinking is essential; it needs to be investigated further to determine relevant indicators.

 

 

Step 2 : Indicators should be aligned with the company’s strategy and objectives

 

Example : If you want to increase your sales by 15% in the next quarter, the chosen indicators should help you identify success factors that drive your strategy forward.

 

 

Step 3 : The indicators should provide action plans.

 

An indicator that cannot be operated will be useless.

 

Example : The chosen indicators will immediately enable you to identify what action to take. Your sales have increased by 20%. With your data, you can find out why : the chosen indicators will reveal actions to pursue (or to stop) in order to increase the sales.

 

To recap : if your indicators correspond to precise needs, they will necessarily be aligned with your strategy and objectives. Thus they will give you points of action.

 

A piece of advice : measure only what you need to track your quarterly and annual goals.

 

Feel free to share your ideas, your indicators to discuss and evaluate their relevance. Your employees also need to feel involved in this creative process. After all, they will reflect their daily work.

 

KPIS : SHARE THE INFORMATION !

 

KPIs share information

 

The indicators put in place by your employees must be your strength. They are an inherent part of the smooth running of the team. Create an atmosphere in which everyone can learn.

 

Being able to measure your progress in relation to your objectives allows to share information and to ensure everyone is working towards the same goals.

 

These goals are sure to be a conversation starter and make meetings more actionable. You have concrete data and results to present. These indicators are also a way to evaluate the quality of the work of an employee. It is, therefore, a good opportunity to support the team to achieve the next goals.

 

In this regard, we have to remind you how much the educational efforts and the way of communication are important : demonstrate empathy towards employees !

 

 

From autonomy to more responsibility

 

Your employees need autonomy in their work. Most of them do not need to be watched all day long.

 

The introduction of relevant indicators is a step in this direction : employees are empowered. Then they will feel involved and will be eager to get the best results possible.

 

 

Simplicity is good, less is more

 

A little point of attention: when manipulating a lot of data, we tend to multiply the number of indicators to be tracked. The best is the enemy of the good. Many reports are overloaded with data, although it is not easy to understand each of the indicators presented.

 

To set up a reporting, we first need to ask ourselves whether the number of KPIs to present is relevant to keep everybody’s attention.

 

We have already raised the issue of reporting in the previous article : How to choose the right graph for your data ?

 

Today, there is a multitude of Business Intelligence tools that allow you to simply aggregate the data to make it readable and understandable quickly.

 

Keep in mind that these KPIs are just a way of understanding what works and what does not work and making the right decisions quickly. Take a few moments to use, to understand and to benefit from the valuable lessons that can be learned for your strategy.

 

 

 

 

Charles Miglietti, Co-founder @Toucan Toco

 

 

 

ABOUT TOUCAN TOCO

 

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Our users : Marketing, Production, Finance, Human Resources, SalesForces and Top management of Big Companies.

 

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