How many years did you spend debating KPIs with your superiors and then “selling” their importance to your team? Every function, process and level of detail – and then came COVID-19. What happened to the Sales per Representative that you fought for years to improve? Or upselling progress at checkout?
The importance of measuring a company’s performance accurately has not changed, but what we are measuring certainly has. New core competencies and dependencies emerged overnight. A speed of change never before planned by even the most aggressive project manager. The days of judging the potential impact of a strategy or project by “gut instinct” are gone. Once valued historical business experience lost relevance.
But for those of you who are overwhelmed by the change, now is the time to move from crisis reaction to the strategic planning of your future hybrid business model. In doing so, redefining relevant KPIs and casting off ballast of now outdated numbers.
Now here’s the good news….the foundational basics of KPIs has not changed.
RULE 1: KPIs should serve YOU- not the other way around. Simply put, they should help you attain your new key strategic priorities. KPIs used to show up like uninvited guests. This is because they were created for the wrong reason; perhaps Finance or a certain leadership group made a requirement to create KPIs to increase discipline and performance. This approach is backwards; it is “KPIs for the sake of KPIs” and usually results in confusion, measuring the wrong things, wasted work hours, or even worse, causing functions to chase the wrong objectives. KPIs should simply help you attain the strategic goals which have already been established, by attaching concrete measurements that reflect progress and alert you to when performance is going off track. Given that, Rule 2 will not surprise you:
RULE 2: Stay focussed on a few clear, relevant KPIs. When a company or business unit is “focussing” (I’m being ironic here) on 20+ KPIs, there’s a problem. We know a solid strategy should not include a confusingly large amount of different objectives, so having an excessive amount of KPIs is not only unnecessary, but also diminishes the likelihood of succeeding with the ones which matter. Having a limited number of clear KPIs and ensuring your staff (not just executive leadership) understand their meaning and importance will significantly increase their likelihood of being prioritised and achieved. KPIs can also be done on a more specific project or functional level, but there again the same rule applies: Less is more, and clarity of purpose is key. Additionally, don’t forget to ensure the chosen KPIs can be reported on easily with little or no manual effort. The final benefit of this approach is that it prevents the task of accurately tracking KPIs from devouring an inordinate amount of your resources’ time (or even creating additional staff dedicated solely to gathering and reporting KPI data).
RULE 3: Spend adequate time choosing the right ones. Making sure those few clear KPIs are well-defined, measurable, can be influenced (“Improve weather by 25%” isn’t going to fly), and drive the success of your key strategic priorities sounds obvious, right? Yet doing this exercise well is often challenging, even more so when you layer on the additional complexity of a Direct Selling environment. For example, a company with a strategy intended to grow sales of a certain region may assign a KPI calling for an increase in the number of active distributors there. But are they certain that an increase in the number of distributors specifically drives higher sales? The truth may be that instead increasing the sales per distributor by investing in additional training etc. for the core group of experienced ones could be the optimal path to success; in fact driving a swift spike in the number of new, inexperienced distributors could even provoke some negative consequences by putting excessive strain on the functions required to support them etc. Newly proposed KPIs should first be vetted by seasoned veterans close to the topic to ensure relevance and credibility.
RULE 4: Be cautious and selective when implementing KPI targets in bonus plans. Companies sometimes give more specific KPI targets to executive leadership in hopes of driving performance in certain areas, but this practice can backfire disastrously. What good is it for the organisation if your Managing Director has spent the whole year prioritising an increase in the number of orders or reputation score, if meanwhile total revenue has actually declined? Again, when in doubt, keep it simple; for this purpose it’s hard to go wrong with sticking to the main performance metrics like sales and profit.
Rather than something to be feared, performance measurement with appropriate KPIs can and should be a crucial helping hand to ensure your company’s key goals are achieved.