Today’s “A:360” podcast answers the question “How do you know if you have the right KPIs?”. I discuss three quick ways you can tell if you have the right KPIs, and what key points you should consider surround your key performance indicators.
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Hey everyone. Welcome to today’s A:360. My name is Brewster Knowlton, and today we’re going to be talking about how you can tell whether or not you have the right KPIs at your organization.
There’s a famous quote by W. Edwards Deming that says, “You can’t manage what you don’t measure.” The managers of your organization will naturally manage towards driving success for what they are measured by. If our key performance indicators align with what we want our managers to actually accomplish, then, naturally, as a byproduct of having the correct KPIs, our managers will improve performance and manage towards achieving those objectives and thresholds set forth by our KPIs and key metrics.
The question therein lies, how do you know if you have the right key performance indicators? We’re going to quickly talk about three key ways that can help you figure out whether or not you’re tracking the right KPIs and the right key measures.
One of the first ways you can tell if you’re tracking the right KPIs is that you have less than 10 KPIs (and, really, five to seven is your best target). But, if you have more than 10 KPIs, you’re probably tracking too many tactical things and not enough strategic things. Or, you’re trying to tackle too many strategic objectives at once (another bad thing). A quick way to tell if you’re tracking the right KPIs is [answering the question], “Do I have between five and seven? Or at least less than 10?” That tells me that you’re tracking only the most strategic things and that you’re focusing on the most important measures that you need to be tracking.
The next way you can tell you have the right KPIs is that your key performance indicators align with your strategic goals. I alluded to this in the last point, but your KPIs must directly support the strategic objectives of the organization whether they be for the next year or the next three to five years. What are those key objectives? And then, ask yourself if your KPIs support those key objectives.
If you think back to Deming’s quote, “You can’t manage what you don’t measure”, it emphasizes the importance of KPIs measuring progress towards strategic goals, because then, naturally, our teams will manage towards success and achieving those strategic goals. It is, therefore, critically important that your key performance indicators align with your strategic goals.
One of the last ways you can tell that you’re measuring the right KPIs is that your KPIs are different than everyone else’s. That’s not to say that there’s not going to be some overlap, but your KPIs need to be unique to your organization and the specific strategic objectives that your organization has.
Benchmarking is a critical aspect of a lot of peer comparisons in many industries, but that doesn’t mean that those benchmarking measures should be your KPIs. Credit Union A, for example, might have high deposits and, therefore, are more interested in loan growth. Credit Union B, however, might have high loans and would be more interested in deposit growth. You have to assess what objectives your organization has and only your organization. Focus not on what your competitors track, but what is best for your organization. Once you determine those strategic objectives, identify those five to seven key performance indicators that will monitor and track your progress towards success in those objectives.
Wrapping up, you can tell if you have the right KPIs by these three points:
- You have less than 10 KPIs. Ideally we want between five and seven.
- Second, your KPIs align with your strategic goals.
- Third, your KPIs aren’t the same as everyone else’s. They accomplish the unique objectives and help you track your progress towards your unique strategic objectives only.
That’s it for today! Thanks again for listening to today’s A:360.
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