Watch Demo

4 Common Pitfalls of KPI Dashboards and How to Avoid Them

By Ted Skinner

    Fri, Oct 26, 2018 @ 11:00 AM KPIs & Dashboards

    As the middle market growth experts, the Rhythm Systems consulting team gets a lot of questions aboutCommon Pitfalls of Team KPI Dashboards KPIs, or Key Performance Indicators. All dashboards are not created equal! I want to tell you 4 of the most common pitfalls of KPI dashboards and how to avoid them. Read through them below and see which ones you have the ability to improve. If you spot one (or two), make sure that you make a to-do list item to correct them and improve your weekly team meetings with the right KPIs.

    1) Too Many KPIs

    There should not be more than 8-12 KPIs for each team dashboard. If you have more than that, you are measuring everything that moves, not what you want to move. It doesn’t mean that others aren’t metrics that you should be measuring, they don’t rise to the level of a KPI that your entire team should be focused on in your weekly team meeting. KPIs drive high-level business objectives, metrics measure specific business processes.

    To fix this problem, start with a blank canvas. Literally, remove all of the KPIs from your dashboard and start over with a blank slate. Know that you can only have 8-12 and those that don’t meet the criteria of driving a business objective need to be removed. We have step-by-step instructions on how to run a KPI audit to make sure that your KPIs are up to date and relevant.

    2) Financial Focus

    Too many dashboards are only focused on financial goals. These certainly are extremely important because at the end of the day the company needs to be profitable, but they shouldn’t be 9 of your top 12 KPIs. Try to keep them to the top couple of financial KPIs relevant to each team. While many managers and executives are driven by the numbers, they can be confusing and demotivating to the majority of the workforce. Make sure your KPIs are balanced and cover employees, customers, revenue and processes.

    To fix this problem, you can create a financial-only KPI dashboard that the executive team reviews on a weekly or monthly basis. The top financial KPIs, such as revenue and gross profit, can be covered on the team KPI dashboards. The finer points of your financial health can be moved to a custom dashboard that contains only the financial information. Rhythm Systems software allows you to create as many custom dashboards as you need to get the complete view of your company.

    3) Unclear Success Criteria

    Too often I see KPIs that are measured, but there aren’t any clear success criteria. Every single one of your KPIs without exception needs to have clear Red, Yellow, Green success criteria. They need to know not only what they are being measured on, but how they are being measured. Your team needs to know exactly what success looks like to manage themselves to make sure that it happens.

    Luckily this is one of the easiest ones to fix. Every year during your annual planning session and every quarter during your quarterly planning session make sure that all of the success criteria are up to date. It is a simple process, start with your green goal. This is the number that you are expecting the team to hit. Then pick your red goal, which is the unacceptable level of performance that you need to actively manage away from, yellow will be between the two. Since we all want to keep and retain A-Players we also want to make sure that we set a SuperGreen, or stretch goal, to motivate your team.

    4) No Leading Indicators

    Leading indicators are the types of KPIs that give you an indication of what is coming in the future. They help you look out of the front windshield, rather than your rearview mirror. As an example, if a salesperson is overly focused on the results indicator of closing deals, that might have a good quarter this quarter. However, they also need to put energy and effort into working their pipeline for the next set of deals, you may have some revenue issues in your future. Make sure that you have an effective mix of leading and results indicators.

    To fix this problem, create leading indicators that help you see how the future results are trending so that you can make minor refinements during the quarter, rather than huge adjustments at the end of the quarter. Start by determining the business problem you are trying to solve, then create clear success criteria so that you know what is expected of the business. Then, ask why at least five times to get to the heart of the matter. Don’t stop asking why until you get a leading indicator that you will help you. Read the full four-step process to create a leading indicator KPI.

    I hope this helps you start refining and updating your KPI dashboards so that you can drive your company towards growth. Once you refine your KPIs, you will find that your weekly meetings are much more productive - not to mention engaging and enjoyable. We have a lot of great KPI resources in the Rhythm Systems KPI Resource Center and some of my favorites blog posts are listed below.

    Rhythm Systems KPI (Key Perfomance Indicator) Guide

    Looking for more KPI information to help get you started? Check out our additional resources:

    KPI Dashboard Resource Center

    25 KPI Examples for Manufacturing Companies

    33 KPI Examples to Measure Productivity & Prevent Organizational Drag

    10 Best Employee KPI Examples

    5 Simple Steps to Create Useful KPIs (Video)

    KPI Examples for Successful Sales Teams

    Marketing KPI Examples

    Photo Credit: iStock by Getty Images 

    Comments