It’s well known that KPIs (Key Performance Indicators) are a fundamental tool for a business to measure performance. KPIs tend to focus attention on data that indicates a business’s or an area within a business’s performance. They can be the cornerstone of how many businesses make decisions – good or bad!

Although it is fantastic to have KPIs, and I’m a strong advocate for businesses having KPIs to measure performance, I do see one major weakness with KPIs: they are backward-looking (reactive). When KPIs are being achieved, everything is great, but when KPIs fall short of expectations or goals, problems generally need to be addressed. There is also often an information lag between activities and most KPI reports.

Don’t get me wrong, KPIs are very powerful. They can help address information overload by giving people a definitive number or target to focus on. We hear so much about the ‘traffic light’ method of reporting KPIs to a team. KPIs provide a tool for measuring the performance of a business at all levels, from the board to management, teams, departments, and individual employees. KPIs serve as the basis for reporting performance, providing feedback on performance, prompting discussion over what changes, if any, need to be made to the relevant business processes, and then providing data during and after implementing change. KPIs are often used for goal setting, and compensation/bonuses are frequently connected to them as well.

Let’s open our minds and flip the dial on KPIs… Imagine managing more proactively rather than reactively. Have you considered having KPDs (Key Performance Drivers)? KPDs are the day-to-day activities required to produce the desired KPI results. If KPDs are correctly identified, then, for the most part, positive results in KPDs should lead to positive KPIs, eventually eliminating the need for KPIs, a bold call, but imagine that for a moment – No KPIs…

Managing KPDs offers great sources of value. Wouldn’t it be great if you could monitor in real-time with the right tracking systems (the more basic, the better) and know whether or not employees and/or your processes are doing the things required for the business’s success every day? When KPDs fall short, you can then intervene quickly, before the KPIs are significantly impacted.

For example, let’s say you meet your KPI on sales, but 30% of the sales for the month is accounted for by the largest order in your business’s history. At the same time, your number of sales calls was short by 20% of the target. Should you be celebrating, or taking a deeply relieving sigh that you had a big order that covered up the underperforming performance of the sales team? Addressing the slowdown in sales calls is much more vital to the company’s success. It’s great to get a windfall; however, you can’t run a business based on windfalls. We tend to value the dollar opportunity lost less than the dollar actually lost, but the astute leader knows that they are equal. Had the planned number of sales calls hit their target, the KPI results might have been even better.

Having KPDs offers a more proactive path and can result in consistently improved KPIs, which is one of the paths to success. So let’s stop looking back and instead look forward to boost our chances of achieving greater productivity.

Ready to transform from a KPI-based model to a KPD model?