According to research from the Gallup organization, employee engagement begins when each employee can strongly agree with the statement, “I know what is expected of me at work.” To this end, Metrics, commonly called Key Performance Indicators or KPIs, help to clarify performance expectations for your functional teams and for every role in your company.
Each functional area of your business will have a small handful of KPIs that drive the results or outcomes you seek. We use them to measure the health and performance of your current operating model. By this I mean the things you do every day to create leads, make sales, provide your products and services, keep your customers happy, grow cash and make profits. Let’s call this stuff “Business As Usual”.
Follow a Process
To keep things simple, you could figure out your Metrics / KPIs by looking at the key elements of your current operating model and going through the following 4-step process;
1. What are the key functional areas of your current operating model?
2. What result or outcome are we looking to achieve in each functional area?
When you tackle those questions, you may need to ask yourself “Why?” several times to really get to the nub of what is important.
These results and outcomes are important. We absolutely need to measure them because they are what we are aiming for at the end of the day. But it's critical to understand that results are not KPIs. KPIs are all about measuring the work that creates the results.
To identify your KPIs, I recommend spending time exploring and debating these next two questions:
3. What “activities” or "actions" drive the result?
4. What “effectiveness” measures let us know how well these activities are being performed?
"Activity" and "effectiveness" measures are things you have the ability to manage and improve. These areas are where your KPIs are to be found.
Results are important but you can’t “manage” results. You can, however, manage the activity and effectiveness of your people's efforts to achieve those results. I recommend that clients measure 5 or fewer KPIs per functional area, and each individual person should have no more than that number either. In my experience, 3 or 4 KPIs is usually sufficient.
Sometimes KPIs aer easy to identify and measure, thanks to software systems such as Marketing Automation (Marketing), CRM (Sales), ERP (Operations), Customer Service Software (Customer Support). Accounting (Finance) etc. These software systems track most of the activities or actions you might want to count in these functional areas, and from there it is relatively easy to derive your effectiveness KPIs too.
Some thought leaders say, “Every role should have a KPI”. In general, I agree with this principle, but in our work with thousands of client firms, I find it easier said than done. Some roles are much harder to quantify. What do you do when you find a role where there is nothing too much to “count”?
I see some companies try to dogmatically apply the, “Every role should have a KPI” principle, but they end up creating nonsense measures that not only fail to drive better results, they disengage people. This occurs most often with roles that are predominantly Project-based or Task-based.
My recommendation: Don’t create a KPI just for the sake of having a measure!
What about KPIs for roles that are hard to quantify?
If you find that after exploring best-practice metrics for the role in question, and after going through the 4-step process described above, you are still struggling to come up with something worth counting, then I recommend you focus on closely managing that person’s Projects and Tasks instead.
Make sure the scope and deadlines for their Projects and Tasks are clearly documented and agreed up front so there is no ambiguity about what needs to be done and by when. Due dates should be realistically achievable, and not just based on an optimistic best-case scenario. Let’s face it, “stuff” happens. Nothing goes exactly as planned. There are always unforeseen delays, disruptions and scheduling issues (see this article for how to perform a “pre-mortem” to address the phenomenon known as the “planning fallacy”).
As a manager, I’d rather have my team members give me a completion date I can count on, than a “hoped for” date that someone is not fully committed to honoring.
For roles with a lot of repetition, set recurring Tasks at the appropriate cadence. Most importantly, the manager should set a recurring weekly 1-on-1 Meeting to discuss that person’s progress and results. Any Project or Task that is behind schedule or overdue must be discussed. I call this “weeding the garden.”
Over time, you will be able to create reports every week that show what % of their Projects are on track, or what % of their Tasks get completed on time, as an overarching measure of their ability to scope their work effectively, and to honor their commitments once made. In essence, you will be able to measure how well they "get things done".
As a manager, you only win when your team succeeds, and the process remains the same: You need to define what excellence looks like for each role, set goals (which could be KPIs and/or Projects) and then coach and support your people to achieve these goals.