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Developing and Using Critical Numbers to Drive Success

By Alan Gehringer

    Tue, Feb 18, 2014 @ 09:30 AM KPIs & Dashboards, Strategy Execution

    Are your critical numbers working for you?  The key to accomplishing your goals is execution.  Critical numbers help ensure you are executing effectively while making the necessary adjustments each week. Some of you might be asking the question “what is a critical number?”  Critical numbers are the top KPI’s that drive success for the quarter and the year.  They keep you focused on your theme or main thing and drive success on your priorities.  We recommend having one that is process oriented and one that is people focused to make sure you have a balanced approach. Here are the primary categories to consider when developing your critical numbers:

    People:Measure success using critical numbers

                Employees

                Customers

                Shareholders

    Process:

                Operations

                Sales

                Record Keeping

    Choosing from each major category assures that you are taking a balanced approach to growth.  We recommend having two critical numbers quarterly and two critical numbers annually.  Sometimes these are the same numbers but in most cases, they are different because the focus is different for each period.   The basis for these critical numbers usually comes from the annual or quarterly theme, the most important thing you are trying to accomplish for the period.   These numbers can also support the most important priority for the period.

    The next question you might be asking is should they be leading indicators or lagging/results indicators.  Many companies use results indicators, such as revenue or EBITDA.  While these are important, they are historical, and by the time you have the information, it is too late to make adjustments.  The power of developing the right KPI’s and critical numbers is to allow you to make weekly adjustments to insure that you will reach your goals for the period.  With that in mind, I recommend using leading indicators to drive performance. 

    Process-related examples if you were trying to improve sales for the quarter would be number of weekly meetings scheduled with prospects or proposals submitted. 

    People-related examples if you are trying to build the team could be training hours per employee or number of potential “A” candidates for hire on the bench. 

    The key is to identify drivers that help you accomplish your goals for the quarter or year and enhance the probability of completing your priorities in the Green or SuperGreen zone.

    Once you identify the right leading critical numbers, assign Red, Yellow, Green and SuperGreen success criteria to them. 

    Green is the goal for the period. This is the result you are looking for and should clearly describe what success looks like.

    Red is unacceptable performance, or failure.

    Yellow is the warning zone between Red and Green and gives you time to make adjustments.

    SuperGreen is your stretch goal that surpasses your expectations of what Green describes.

    The last point I want to share is that each critical number should have an owner.  This is the person responsible for ensuring that the appropriate actions are taken to get under-performing numbers back on track.

    We always add the critical numbers to our KPI dashboard and monitor performance on these weekly.  Celebrate the success of SuperGreen results while making adjustments to get Red or Yellow numbers back on track to finish the quarter successfully. 

    Coaching tip: “Don’t wait too long to make adjustments to Red or Yellow Critical Numbers. Schedule time and pull in the right resources if you can’t identify solutions in your weekly meeting while you still have time to succeed.”

    Critical numbers are metrics designed to drive a company theme, main thing or priorities for a specific period of time.  They usually stay in place for the year and are different for the quarter.  Quarterly numbers are in some cases a sub-set of the annual critical numbers.  These should be the most important and visible KPI’s that the company monitors to drive success.  Manage them weekly and display them to keep them front and center for your team.  Focus on leading indicators whenever possible.

    Let me know how you are using critical numbers to drive success for your company and if you have any tips to share. 

    Execute well, Alan

     

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