KPIs tell you what already happened. Key Performance Drivers tell you what’s about to. Flip the dial and manage ahead of the numbers.
It’s well known that KPIs (Key Performance Indicators) are a fundamental tool for measuring business performance. They focus attention on data that shows how a business, or part of it, is performing. They can be the cornerstone of how many businesses make decisions, good or bad!
It’s fantastic to have KPIs, and I’m a strong advocate for them. But I see one major weakness: they look backward. They are reactive. When KPIs are being hit, everything is great. When they fall short, problems generally need to be addressed. There is also often a lag between the activity and the KPI report.
KPIs are still very powerful. They help cut through information overload by giving people a clear number or target to focus on. We hear a lot about the “traffic light” way of reporting KPIs to a team. KPIs measure performance at every level, from the board to management, teams, departments and individual employees. They are the basis for reporting and feedback, for discussing what changes need to be made to business processes, and for providing data during and after change. KPIs are often used for goal setting, and pay and bonuses are frequently tied to them too.
Flip the dial
Imagine managing proactively rather than reactively. Have you considered KPDs (Key Performance Drivers)? KPDs are the day-to-day activities needed to produce the KPI results you want. If KPDs are identified correctly, then for the most part good results in your KPDs should lead to good KPIs, eventually removing the need for KPIs at all. A bold call, but imagine that for a moment: no KPIs.
Managing KPDs creates real value. Wouldn’t it be great to track in real time, with the right system (the more basic, the better), whether your people and processes are doing what the business needs every day? When KPDs fall short, you can step in quickly, before the KPIs take a hit.
An example
Say you hit your sales KPI, but 30% of the month’s sales came from the largest order in your business’s history. At the same time, your sales calls were 20% short of target. Should you be celebrating, or breathing a sigh of relief that a big order covered up the sales team’s underperformance?
Addressing the drop in sales calls is far more important to the company’s success. A windfall is great, but you can’t run a business on windfalls. We tend to value the dollar opportunity lost less than the dollar actually lost, but the astute leader knows they are equal. Had the sales calls hit their target, the KPI result might have been even better.
KPDs offer a more proactive path and can lead to consistently better KPIs, which is one of the paths to success. So let’s stop looking back, and look forward to boost our chances of greater productivity.