KPI Targets: Know the Difference Between Key Priorities, KPIs and Targets
The most common pitfall I see in companies who are new to Rhythm and the Rockefeller Habits is thinking that setting targets for their KPIs is the same thing as having a plan. A complete plan includes KPIs, Company Priorities, Personal Priorities, and Red/Yellow/Green success criteria for all. A KPI target is simply the goal that you are trying to achieve, it is a metric. What is your team going to do in order to hit the KPI? Those are your key priorities, or quarterly rocks that will help you improve your business to meet the KPI targets.
If you ask any salesperson what their #1 priority is for the quarter, they will tell you “to make my revenue goal!” True – but how are they going to make their revenue goal. Any salesperson with a goal but no game plan is set up for failure.
The same holds true at the Company level. You can set a target to grow to $200 million, but you must also identify the key priorities required to hit that number. A healthy Rhythm of Strategic Thinking, Execution Planning, and Doing the Work will accelerate you toward this goal. Setting KPI targets without defining priorities is just fool’s gold.
So, what is a key priority? And what is a KPI?
Key Priorities/Quarterly Rocks
A Priority is a specific action statement. There is a verb. There is a due date and an owner. It simply states what activities you or your team are committing to deliver in the quarter. A Quarterly Plan consists of 3-5 Company Priorities for the whole group and 3-5 Personal Priorities for each person on the executive team.
Company Priority #1: Launch new product X by Sept. 30th (John Product)
Company Priority # 2: Expand sales team in territory X (Susie Sales)
Company Priority #3: Complete due diligence on possible acquisition by May 5th (Joe CEO)
Personal Priority: Relaunch website with new product information (Jen Marketing)
Personal Priority: Hire 2 new sales managers (Jose HR)
Personal Priority: Review and edit contracts X & Y (David Legal)
Personal Priority: Complete beta testing of new product (John Product)
Personal Priority: Launch new comp plan (Susie Sales)
KPIs - Key Performance Indicator and Targets
A KPI (Key Performance Indicator) is simply a metric – a number you track that helps you solve a problem or gives you insight. KPIs can be divided into two categories: leading indicators and results indicators. A result indicator defines an outcome. These are your targets, or the number you need to hit. A leading indicator helps you know if you are on track to achieve your desired results.
Results Indicator: $1 million in sales by the end of the quarter
Leading Indicator: $3 million in pipeline (necessary to produce $1 million in sales)
Results Indicator: 10 new customers by the end of the quarter
Leading Indicator: 50 face-to-face meetings (should result in 10 new customers)
Results Indicator: 90% client retention
Leading Indicator: NPS > 8.5
During your next planning session, be aware of KPIs masked as Priorities. To avoid this, set your KPI targets first and then develop a plan that will help you get there. And remember that priorities should include a verb, a timeframe and an owner. And both KPIs and Priorities should have clearly defined Red/Yellow/Green success criteria.
Learn more about how to have an effective Quarterly Planning Session here.
Annual Planning: 9 Tips to Focus & Align Your Team with a Great Plan
Annual Planning Playbook: 5 Steps to Create a Winning Annual Plan
How CEOs Can Avoid High-Cost Mistakes in Annual Planning
Best Practices for Annual Planning
Rhythm Systems Annual Planning Resource Center