Key Performance Indicators – Best Practices in Creating KPI Dashboards, Developing Success Metrics & Managing KPI Business Processes

The Key Performance Indicator (KPI) Imperative

It doesn’t matter what industry you are in or the number of employees you have working in your business, having a clear strategic framework for driving innovation and change within your organization is essential to success. Many businesses struggle to reach their full potential, but those with robust Key Performance Indicators and the proper tactical processes in place will fare much better in today’s unprecedented times.

To succeed in business today, business leaders need to develop both their intellectual and emotional intelligence. They need to be flexible to changes in the marketplace, shifts in customer behavior, adjustments within the organization’s culture, and technological advances which may disrupt the industry as a whole. They also need to be good at planning for the future and driving organizational goals despite increasing uncertainty.

For many leaders, the shifting marketplace represents challenges which may prove too much to handle. With this in mind, it’s important to make sure you have the right systems in place and metrics to ensure your business is tracking progress, so it both survives and thrives.

If there is one thing we’ve learned from building the web’s largest collection of business process apps and online templates, it is that no single strategic framework or tactical spreadsheet will make (or break) a successful business. Success or failure rests with the team, the individual, and their ability to effectively execute business strategies.

The simple fact of the matter is that exhaustive strategic frameworks and detailed tactical workflows are only as good as the people who implement them. As Otto Von Bismark said (in the 1880s!), “A bad plan that is well executed will yield much better results than a good plan that is poorly executed.” It is the responsibility of a business leader to take all of the information that he or she has in their possession and act on that information as quickly as possible.

Many organizations both large and small struggle to take effective action. Said another way, if you’re not sure where you’re going, any path will get you there. It’s a painfully true statement that makes the case for clearly defining, and then measuring your unique definition of success. That’s where KPIs, or Key Performance Indicators, come into play.

With this in mind, we have pulled together what we believe are the best of the best practices for building out key performance indicators. KPIs create focus around what matters, and more importantly, how to measure progress. And we’ve made a very simple free template available that can help anyone create KPIs based on these best practices as described below.

Best Practices for Creating & Managing KPIs

As management guru Peter Drucker once said, “what’s measured, improves.” Key Performance Indicators provide valuable insights to an organization because they allow a business to track what is most important to its success. KPIs help businesses measure the effectiveness of their business strategies and whether you are achieving the results you are trying to achieve.

 

The Best KPIs and KPI Processes Focus on 3 Principles

Key Performance Indicators need to have three qualities to effectively drive strategy:

1. KPIs need to be measurable

The KPIs you choose need to be quantifiable in order to know whether or not you have actually accomplished the task. For example, the amount of sales achieved, market share percentage, or number of new customers – those are quantifiable measures. You can also have binary quantifiable measurements like “achieved” or “not achieved”. For instance, if your marketing strategy relies on getting coverage in a major publication by the end of the quarter, you will either achieve that metric or not.

2. KPIs should be diverse.

You need a blend of both lagging indicators and leading indicators. Lagging indicators show how you have performed in the past (for instance historical revenue) but don’t necessarily forecast the future. Leading indicators allow you to anticipate what the future will look like. An example of a leading indicator might be visits to your website as an indicator of future sales.

3. KPIs must be fully integrated across the business.

You want to make sure your KPIs are supporting your overall business strategy and your objectives, and that you have owners and clear timeframes for each KPI so you know what to expect when. Without getting buy-in from across the organization about the specific KPIs you are using to measure success, you will be unable to track your business’s progress effectively.

Once you have set these KPIs and decided what you are going to measure, it is essential to set up a structure for regularly tracking and monitoring progress for each, ideally in some type of KPI Dashboard.

 

KPI Dashboards Track Progress on Your Top Success Measures

To keep an organization on track in a tumultuous economic environment, business leaders need to constantly assess the progress made by their companies. Tracking business performance requires regular measurement and attention to detail. We’ve looked at businesses across the globe and spoken with hundreds of business leaders at some of the world’s most innovative companies to determine what to track to not just measure progress, but drive it.

One tool that has allowed many of the world’s leading businesses to successfully track and monitor progress is the KPI management dashboard. A KPI management dashboard provides leaders with a single-view of current progress within a company or a team, which informs decision-making on many levels.

But is a KPI management dashboard really necessary for business success? Shouldn’t teams and individuals be able to track and manage their own key performance metrics and report back to the senior leadership on their progress? While it may work for some businesses to share progress on specific KPIs in a more informal way, the vast majority of organizations benefit greatly from aggregating KPIs together into one single view – to create a “single source of truth.” This isn’t just for the senior leadership either, since it helps the whole organization stay up-to-date on progress and understand what gaps need to be filled.

Consider the value of being able to keep tabs on all KPIs from across a team in one snapshot. By gathering all of the KPIs from a team or business in one place, organizations can keep tabs on the health of their business and make better, faster decisions to support future growth. They can also flag trouble areas and provide extra support to teams that need help.

How to Create Key Performance Indicators (KPIs)

A best-in-class KPI Dashboard allows a team or organization to create and manage multiple Key Performance Indicators in one place, set time frames and assign responsibilities to specific measures. Whatever format the dashboard takes, it needs to provide a way for a team to come together and review progress on specific KPIs that are relevant and in a format that makes sense given the specific business and areas of measurement.

For example, when defining KPIs, it’s important to consider the different dimensions that KPI’s can address:

• Financial results
• Business growth
• Cost savings
• Innovation
• Process efficiency
• Customer satisfaction

 

Building out a clear KPI strategy and dashboard involves answering these questions. upBOARD’s model uses a simple decision tree to create custom KPIs. Anyone can use a similar approach to address the questions to help tailor KPIs that will achieve your goals.

Key Performance Indicator Dashboards

When you create a KPI dashboard, the first step is to think about exactly what you will measure. Will you measure revenue or sales or both? Will you track the number of widgets manufactured over a set period? Select metrics that are varied and give you a broad understanding of the various elements of the business.

Next, ensure you select a combination of both “leading” and “lagging” performance indicators. Leading Indicators help you forecast what will happen in the future. For example, website visitors can be a leading indicator for revenue. The most visitors, the eventual revenue. Lagging indicators, on the other hand, are retrospective measures. Revenue, for example, is a lagging indicator since it’s a measure of customer behavior that has already occurred in the past (through buying something). It doesn’t help predict or forecast what will likely occur in the future.

Once you have selected the KPIs you want to track and have decided how frequently you’d like to track those metrics, the next thing to do is to decide the best way to visualize the data. Make sure to choose a way of visualizing the data which helps easily see if you are on track or falling behind in terms of KPI progress.

Implementing KPIs through Team Collaboration

While it is important to use KPIs to define strategic metrics that indicate desired business performance over time, it is also critical to maintain momentum at an implementation level to ensure that work is being done to meet those objectives. Enter Huddle Boards.

Huddle Boards are an essential tool for any team. Huddle Boards have grown in popularity in the healthcare profession because they allow tight-knit groups like nurses and physicians to collaborate closely and effectively (e.g., “huddle”) to ensure they are all providing support to one another to achieve quality goals. Many businesses and other functions are now adopting Huddle Boards for more general team collaboration.

A Huddle Board is a board, either physical or online, that allows a team to come together to “huddle” around it and come together to review what is most important for that team to do and track on an ongoing basis. Topics covered on a Huddle Board may include topics such as safety, quality, delivery, cost, budgets, inventory, or even recognizing other team members for jobs well done.

One of the best ways to use huddle boards to implement KPIs is to enable continuous measurement across a team. You can choose to create different huddle boards based on specific teams’ needs which include both quantitative as well as qualitative metrics. For instance, some huddle boards are designed to measure progress on specific projects or tasks. You may measure the percentage achieved of a specific quantitative target goal like target revenue or units produced. Huddle boards are also helpful in tracking latest results. This form of tracking is particularly important when tracking metrics like weekly sales, customer complaints, or bug fixes.

You can also create huddle boards to support common team-based activities like conducting a gap analysis, defining key success factors, creating RACI charts to track roles and responsibilities, or building task lists for your team. These strategic activities can help reveal new KPI’s to consider as levers to focus on that fill gaps or drive new strategies.

For example, conducting a regular Gap Analysis to track current and future desired states within a team helps jump start critical thinking within the team.

Huddle boards can also be used to facilitate RACI Chart management. RACI stands for Responsible, Accountable, Consulted, Informed, and provides oversight for a team into who is responsible for specific tasks and responsibilities, ensuring the right people are focused on implementing the right tasks to achieve your Key Performance Indicators.

Key Performance Indicators are one of the most fundamental best practices for organization. Many teams and organizations use KPIs to track progress but fail to leverage the power for KPIs as a team-based process.

People support what they help create. By engaging your team in creating KPIs, and then collaborative tracking them over time, you can turn a tool into a process that can truly transform your results, and organization.