We had such a great webcast! There were so many questions, we could not answer them all.
Here are the first set of answers from, "How to Use KPIs to Focus Your Team and Keep Your Plan on Track." More answers will be sent out this week.
Q: Are the KPIs set up to connect the quarter to the plan?
Yes. You should consider how KPIs can connect the quarter to your overall plan. This helps you stay focused on achieving the plan.
Q: Are there methods besides talking to clients for determining trends and leading indicators?
There are many ways to determine trends - market research surveys, market analysts, etc. Leading indicators are more specific to the business problem that you are trying to solve and how you should go about solving it, so I recommend discussions and questions to figure out leading indicators.
Q: This example focuses on product development/sales/marketing. Can you have concurrent KPIs being worked on within different company departments, e.g. financial systems improvements?
- Yes. You can have KPIs from other departments. Make sure that those KPIs all work together for the overall success of the company. Avoid the pitfall of each department being only focused on their goals and not the overall company goals.
Q: I am using the Rockefeller Habits and Net Promoter Score and have people in the office taking feedback. How do you know if the person taking the feedback isn't lying to meet targets?
- You can't know that in the KPI. Here is where core values might be the right tool instead. If you can't trust your people to tell the truth, consider how to develop strong core values... and then shoot the liars!
Q: I have 5 companies, so don't I need lots of KPIs?
- Each company should be considered on its own, so... a question to consider is how are the KPIs for each of the 5 companies?
Q: Did you establish a measurement for EBITDA (the results)?
- Yes, and we Red-Yellow-Greened it as well!
Q: Do you share one team's KPIs with other teams/peers?
- Absolutely - transparency helps teamwork, and it helps everyone focus on getting to where the company wants to go.
Q: Good presentation!... How many KPIs should a company develop per business unit and for upper management?
- I can't really answer this without knowing more about your company situation.... but.... less is more. Fewer KPIs give you more focus on the key issues to work on.
Q: Does the Rhythm software link or merge KPIs to one another?
- Rhythm allows you to link as well as build composite KPIs that roll up data. The tool lets you cascade the information down and back up. It's super cool! (But, of course I would think that!)
Q: We are a domestic supplier for auto components. We need to create a new department for Export Marketing. Should we create the KPIs before recruiting the people, or wait until we've finished recruiting the department and then start setting the KPIs along with them?
- Yes and Yes! Consider the 2 step process: 1) What RESULTS do you want to achieve with the new department? Figure out your desired results and how to measure it. Use this to recruit. If the candidates cannot sign up to deliver the results, discuss and learn. You want to either hire someone who can deliver the desired results OR modify your desired results. Either way, gain clarity on what needs to be achieved and gain alignment before hiring the person. 2) After your team is on board, discuss and develop the right leading indicator together that will help keep the team on track to achieve the desired results.
Q: How can we track individual performance? We want accountability down to the specific user.
- You can track individual performance with KPIs. If the individual is part of a team, create a personal KPI with clear Red-Yellow-Green success criteria. Personal accountability is good! Then, you can also create a composite KPI and sum up every individual and discuss performance at the team level as well.
Q: How do we define leading indicators for functions such as HR?
- The same way. What does HR need to accomplish? You need to be able to describe what results you want achieved. Then, ask a bunch of questions about how to know if you are on track for that. Remember… leading indicators can change based on what you are trying to achieve.
Q: How do we (and is it a good idea to) benchmark against similar industry KPIs? Where might we find benchmarks for KPIs? Are companies willing to share their stories?
- Benchmarking has its purpose: to know how you are doing on similar measurements as compared to your competition. But, if you want to be great and beat your competition, you need to figure out what it is that the industry is missing and focus on that. Different versus being better. You will need to deploy different strategies that are measured by different KPIs to be different.
Q: How does one measure quantitatively KPIs that are really qualitative like managing, organizing, and collaborating?
- All management work like managing, organizing and collaborating should improve your results. You should get there faster, better and stronger, or your management activities are not helping. The approach is not that different. Spend time discussing and agreeing on what the RESULTS should be. Then, find a way to measure the result and drill down to get to a leading indicator as well. Let's take organizing for example. What are you trying to improve? Is it to reduce waste? To reduce costs? If it is costs, then measure your costs before you begin that organizing activity. Then, measure your costs again. Costs should have gone down, or your organizing efforts are not getting you to the right results.
Q: I am not clear on KPIs vs. Critical Numbers or Smart Numbers. Can you explain?
- KPIs are metrics that measure performance (Key Performance Indicators). Critical Numbers is a term used in Rockefeller Habits and Open Book Management (The Great Game of Business). Critical Numbers are used to focus on a short-term improvement. Think of Critical Numbers as choosing a specific KPI to focus on for a short-term goal - to focus your entire team on achieving the goal.
Q: Who is the person indicated to communicate KPIs to the organization?
- Instead of a single person communicating all the KPIs, consider having each executive team member owning 1 KPI that they are accountable for to the organization. Store your KPIs in a system like Rhythm, accessible to all. The question then becomes who is accountable for the KPI, instead of who is going to communicate it to the organization.
Q: Is it better to have one company KPI or individual KPIs per Team Member?
- Both. They serve different purposes. Have a company KPI to focus everyone on a common goal. Then, you can also have individual KPIs for personal accountability.
Q: Is there a cloud-based or desk-top software application that will allow us to capture information, manage the conversation, and generate reports simply and systematically? While I understand the need for rhythm and accountability, I want to keep the administrative burden as light as possible.
- Absolutely. Our Rhythm system will facilitate capturing KPIs and Priorities and help your team focus on achieving goals with minimum discipline.
Q: Does one KPI always have one leading indicator?
- A leading indicator is a KPI that measures if you are on track towards a goal. You should be able to discover a leading indicator for every result indicator.
Q: My team has been tracking a number of KPIs that are not leading indicators, and they have been very demotivating. When I go back to my associates, how do I get them to look through the windshield rather that in the rear view mirror?
- I suggest having your associates watch the archive of this webcast. May I ask why it is demotivating? Are the goals set too far out of reach? Don't worry… progress begins with a single step on the right process. You took your step today!
Q: Please clarify. Your KPI in the example is the No. of client suggestions. But what are the 3 indicators you have in the example dashboard? Are those KPIs, too?
- The example dashboard I used had 2 leading indicators and 1 result indicator. The intent of the dashboard is to focus us on having the right discussions in a timely manner, giving us more time to solve challenges and problems early in the quarter.
Q: With Steve's case study, how were the follow-though of the "Smart Suggestions" driven and tracked?
- Steve tracked them in a database. That allowed him to then review, discuss with his team, and make product decisions based on these suggestions.
Q: Should each department create a KPI, or should it be company wide?
- Both. It is good for every department to understand how they contribute to the overall plan, and how to measure it. We should all know if we are on track. We should not have to guess or assume.
Q: How many leading indicators should be targeted?
- I would suggest one leading indicator that matches the results that you want to achieve. Remember that the leading indicators are predictive of future results.
Q: Is the weekly Sales KPI calculated "projecting" the quarter or reporting just how the week went?
- The weekly sales KPI is calculated to project or forecast the quarter. That way, you can discuss adjustments and action plans if you do not think you are going to achieve the stated goal for the quarter.
Q: This seems like a rather generic KPI example. From your experience, how granular can a Leading Indicator KPI get?
- The example is very specific to the client. I would always focus on achieving the desired results. As Stephen Covey said, "Begin with the end in mind." Your Leading indicator needs to help you decide if you need to take action or if you are on track. On a case by case basis, I would develop leading indicators that are granular enough for me to see how my actions are affecting our progress towards our goals.
Q: What is EBITDA?
- EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization. It is a key results indicator that financial investors use to benchmark the financial health of a company.
Q: What about long lead-time sales? I own a PR/social media firm, and sales can be 4-12 weeks once decisions go through decision makers (director of digital, director of PR, CMO, CEO, etc.). How do you make interim KPIs?
- For long lead-time sales, consider having sales funnel KPIs. Measure your sales funnel and observe which is the best indicator of success in your sales funnel. Which predicts a future sale with the best probability? Use that!
Q: What happens if you have something to implement into a software product? How do you get a KPI for that? Especially if it is very important, but only needs 1-2 weeks to do?
- It depends what you are trying to improve. If it only takes 1-2 weeks to do this, don't over complicate life. Track your milestones. Are they getting done on time?