Setting KPIs

Most people who run a business or part of a large company struggle when it comes to setting KPIs – Key Performance Indicators.

Here are three steps for setting KPIs for your team:

  1. Ask what the person is responsible for and what you want them to focus on.
  • Check their position description and adjust if necessary
  • If they don’t have a position description, there is an article on my blog outlining how to write a good position description
  • Identify 5-7 key areas of responsibility
  • Sum up the main reason why you have that role in your business
  • Do you have any initiatives for the year to focus on improving or developing key areas of your business? If any of those are relevant to a particular role, include it in your list of 5-7 key areas of responsibility
  • You should now know what KPIs you want the person to focus on. KPIs are about focus on key – important – outcomes.
  1. You can also ask what are the most important of the person’s key responsibilities that will have the greatest impact on the business.
  • For example, for an Account Manager it will be client retention and growth; it may specifically be retention of the largest clients in their portfolio
  • For an Operations Manager, it could be core process improvement to reduce cost of goods
  • For a Finance Manager, it is predominantly compliance and protection of the company from risk
  • For any employee, it may be responsibility for a special project or initiative that may be relevant to one year in particular and not part of their ongoing responsibilities
  • A key KPI may also relate to a problem that must be addressed and solved within a certain timeframe, for example, to successfully transition the company from one enterprise management system to a new one without any down-time
  1. How many KPIs do you set?
  • Depending on the scope, difficulty and timeframe of the KPIs, and the person’s role, I usually set between 2-5 KPIs at the most.
  • I always set quantifiable and qualitative measures. KPIs MUST be able to be measured.
  • If a sales person misses a KPI to achieve 1M in new business by 100K, that’s a call you will make as to whether they have achieved that KPI or not.
  • If a sales person has achieved 1.5M in new business on a KPI of 1M, BUT they are disruptive and have attitude and behaviour issues with the rest of the team, they are unlikely to meet qualitative KPIs if you’ve set up the right measures.
  • Measures for behaviour and attitude might include things like: demonstrable collaboration with the rest of the team on XYZ, or, full attendance and contribution on all agenda items at annual strategic retreat. The tighter the qualitative measures are the better, because it’s usually these issues that, when they arise, cause problems for the whole team and are the hardest to performance manage.

Converting Team KPIs to Company KPIs

I incorporate the most important KPIs from my direct reports into the company’s overall dashboard as indicators that we track, along with key financial indicators and marketing measures.

It’s a bit circular because knowing what the business needs to achieve and focus on, will translate to key indicators for the team members responsible, which then goes back into the management dashboard for the company overall.

The other great thing about KPIs for your team is that it makes one-on-ones easier as you have timelines and progress of key indicators to track and discuss, and it keeps your team focused on what MUST be done, even if you aren’t there.