When running a business, it’s a good idea to keep an eye on how things are going on a regular basis – weekly or monthly usually but sometimes quarterly will work too. We can keep an eye on the company by working out specific data points that together give a picture of the company’s health. These are called Key Performance Indicators (KPI’s).  

Although there are some KPI’s which will apply to all companies, like net profit and cash in the bank, you should develop your KPI’s in line with your long-term company/personal goals.  

But how might you do that? Here are 7 steps that you should take to develop the KPI’s for your business:

Have clear Strategic Objectives

What are your aims in business? Be very precise and descriptive with this.  

You can start with these 6 main strategic objectives and work from there:

- To be a profitable and solvent business

- To be a legal and compliant business

- To be a growing business

- To be an innovative business

- To manage risk

- To better quality of life

Let’s move away from business and develop KPI’s for the long-term personal goal of “being healthy” as an example.  

Engage your Team

If you have a team, get their input. Who will be ultimately responsible for delivering some of the results you’re tracking? Access their level and type of involvement and get the team involved in the process as early as possible. This is a good opportunity for you to reiterate what you’re trying to do with the business and get their buy-in.  

Longlist your KPI’s  

To track our KPI’s we need to be able to find usable data that makes up our goals. We start by creating a longlist (as opposed to a shortlist which we’ll get to later).  

We do this by breaking down our goals into as many pieces as possible. Our goal of “Being healthy” can be broken down into themes like “Eating well,” “Exercising lots,” and “Sleeping Enough.”  

“Eating well” for example, can now be broken down further. We all know we need to have a “Varied diet,” “Drink lots of water” and “Restrict our calorie intake.” These make up your tactical level.  

To get data point that we can track we need to be able to put numbers against these. For example, you could track for daily calorie intake, or the ml’s of water you take onboard each day. These are your trackable KPI’s.  

I’ve broken down the levels mentioned above into the below which should illustrate my point:

If we complete this breaking down process for “Eating well,” “Exercising lots” and “Sleeping enough,” we’ll end up with loads of data points that we can track. At the end of the month, we can look back on this data, and see if we’ve achieved our on-going goal of “Being healthy.”  

Repeat this process for your other Strategic Objectives and you’ll start to build out a very long list of KPI’s to track. Don’t hold back on this process, we’ll begin to shortlist these KPI’s later.  

Key Performance Indicators will often work well together, however, on occasion, they may conflict against each other. For example, “speed of manufacturing” and “reducing waste” often conflict as inevitably creates more mistakes and wastage. You’ll need to highlight these conflicting KPI’s.

Shortlist your KPI’s

The next step is to take your long list of KPI’s and plot them on the matrix shown below.  

Once you’ve plotted your KPI’s on the matrix, you’ll need to understand what this means.  

If your KPI’s fall into the green area, you should be measuring them already – if you’re not, measure them from today. These are easy to measure and are relevant to your strategic objectives.  

The blue area KPI’s are more difficult to measure but are still relevant to your strategy. They’re high reward, so use this as a list of KPI’s to start measure as soon as possible. You’ll need to come up with ways of measuring these.  

The red area KPI’s can be ignored completely. They might be easy to measure, but they’re not relevant to your strategic objectives.  

Define your Shortlisted KPI’s

For each KPI you’ll want to create a fact sheet about it. Give your KPI a name, purpose and detail out some extra information. Use the below list to build out your fact sheets:

- KPI Name

- Purpose

- Who will use it?

- Where does the data come from?

- What is the definition of this KPI, and how is it calculated?

    - Is there a calculation – what is it?

    - What is or isn’t included?

- What resources are needed to produce this KPI?

- Target – what score/number do you want to achieve?

- Target Outcome – what will achieving the target deliver?

- What is the cost of implementing this KPI?

- Are there any expected problems with this KPI?

    - Are there any expected accuracy issues etc?

Prototype

Once you’ve got a detailed plan, try them out! Are the right people giving you the information you need to show your KPI results regularly? Are there any issues that need to be ironed out? Is there a better way to get the data?

Go Live

Once you’ve ironed out any hiccups and the systems and people involved have been tested, go live. You’re now ready to start relying on this information and using it to push your business forward.  

Summary

The above is a tried and tested method to find KPI’s that suit you and your business. As you know, every business is different and therefore will be tracking different KPI’s.  

If you’d like help in running through the above, we run a KPI workshop. This is usually a half-day event and we’ll run through all of the above with you and your team. By the end of the session, you’ll have a shortlist of defined KPI’s that you can track moving forwards. Pair the KPI’s with our monthly/quarterly management account reporting and you’ll have all the regular information at your fingertips to help push your business forwards.  

If you’re interested in finding out more, book a discovery call at www.calendly.com/accountr/discovery