We’ve heard experts for years trot out the SMART Key Performance Indicator metrics – Specific, Measurable, Attainable, Relevant and Time-based. We know that repeating them here is not reinventing the wheel, but truly, using the SMART metrics should always be your first step in the process of setting goal. You should be certain to check back the SMART metrics against every goal you set to ensure they meet all criteria.
A backwards view to looking at your Organisational KPI’s
Backwards Financial Goals
When you set your financial goals, working backwards from a five year period can be a really clever method for establishing where you want to be, and what you need to do year-on-year to get there.
For example: Your five-year goal is to achieve $500k in net profit from your current $100k profit position
You want to achieve growth in profits consistently in year 1 – 5, which means that you will need to consistently hit an extra $100,000 in profit each year or $8,333 per month.
You want to put in all the hard yards in year one to build your base quickly to a benchmark level, and then slow down and maintain consistent small and steady growth after this. So, your target net profit might be $200,000 in the first year or $16,666 per month, and for the remaining four years this profit sits steadily at $75,000 or $6,250 per month.
It doesn’t matter which scenario you choose, the amount you’re targeting or the end-goal itself (revenue/profit/turnover/growth), the point is that by working backwards from your longer term goal you can then determine the method for how you execute your strategy to actually get there.
Backwards Client Perspectives
Using exactly the same method as above in the financial growth method, you can also apply this your client base. You will need to have made the decision on the longer term goal first and whether you want to achieve a quick/consistent or slow growth scenario, and then you can set to work on what is driving your customer behaviour and how to relates to your financial goals.
For example, if you’ve decided that your most important client KPI is to increase revenue by $100,000 each year, then the next step is to determine how this happens. Do you need to increase your prices? Do you need to elevate or increase your service offering to your current customers? Do you need to market to and sell new customers? Exactly the same as the financial goals that you set, how you go about setting (and achieving) these client targets is based entirely on your overall business strategy
As an example, you may determine that to reach the KPI target you’ve set in place, an extra $50,000 in revenue should come from price increases with no change in service, $30,000 should come upgrading repeat clients to a new service arrangement, and $20,000 should come from all new clients.
Setting team/individual KPI’s
Keep it small + simple
When it comes to setting Key Performance Indicators for your team, less is definitely more. People get really overwhelmed knowing they have to achieve twenty different metrics for themselves. Each goal for each individual person should really only have a few KPI’s attached, which must be directly related to that goal. Experts suggest that setting between four and ten KPI’s per goal should definitely be enough. Don’t drown your staff (and yourself!) in all that data.
Team buy in is essential
It is absolutely essential that any KPI’s must be formulated in consultation and collaboration with the team or individuals in reference. Any discussions need to revolve around what the persons goals within the organisation are, what will ultimately give them satisfaction in their role and keep them motivated while keeping relevant to the company’s goals. KPI’s that are just too out of reach for employees mean that they will never attempt to achieve them – instead set in place a strategy for how the company will help them achieve these KPI’s so they know that the organisation WANTS them to achieve these. Too often we hear of KPI and bonus programs that are completely unattainable, and sometimes just downright unfair.
Regularly Monitor KPI’s in a meaningful way.
Many organisations set a formal quarterly/half yearly or annual review of staff KPI’s, but businesses who report that they maintain KPI discussions as part of everyday working life often report a much higher success rate for achievement. Employees who experience the more formal KPI interviews often report feeling like they are “sitting an exam”, and it then becomes an extra, onerous task on the business to perform the checks because they are not factored in as part of regular everyday discussions.