Lately, I've been working with clients who are just getting started on their KPIs. They are deciding what to measure and who owns the results. They are also making sure they have a good mix of leading indicators and results indicators across all 4 categories (employees, customers, revenue, and processes). That's the easy part. The "how" to measure is where it gets tricky and where lots of teams get stuck. As they set out to figure out how they will measure these areas, there are a few principles that everyone has to agree to for consistency.
Clarifying expectations. How are we going to arrive at a number? For example, if we are going to measure "Number of Sales Appointments," how do we define "Appointment?" Is it a face-to-face meeting? A phone call lasting more than 15 minutes? Make sure everyone is using the same methodology to arrive at their numbers.
Supporting systems. Most teams have other systems they pull numbers from, like a CRM, a financial management system, etc. Make sure everyone knows where to go to get the proper numbers and how to navigate.
Standardize Red-Yellow-Greens. If you have KPIs that flow throughout the organization as a composite make sure your RYGs are standardized. For example, there is an overall revenue KPI that is made up of revenue from 4 departments. While each department may have a different Green, the SuperGreen and Red calculations should be consistent. SuperGreen might be Green + 10% and Red might be 10% less than Green. The formula should hold true for all 4 departments as well as the overall KPI.
Time Horizon. Decide if a number is going to be measured weekly, monthly or quarterly. This should be reflected in your RYG success criteria. For example, your revenue Green might be what you want to achieve for the quarter. Green for your number of sales appointments might be 15 per week. Keep in mind the time horizon you select may be limited by your systems. For example, you may only be able to pull a revenue number once a month.
Regardless of when you have real numbers in front of you, every KPI should be statused weekly. For example, if you only have revenue numbers once a month in Week 4 of the quarter, the KPI should still be statused based on a forecast of where you believe the number will come in during Weeks 1-3. This helps the team avoid being blindsided and allows time for adjustments before final numbers are in.
There are a few nuances to consider when selecting a time horizon:
If a number is measured weekly, be prepared for a volatile status. It could be SuperGreen one week and Red the next. Weekly numbers don't allow you time to make swift adjustments. You are more likely to make adjustments based on a trend than on one week’s result. For example, if a weekly number is Red more than 3 weeks in a row, you know you need to do something different.
If a number is reported monthly, status based on a forecast for weeks that you don't have a real number. On weeks when you do have a real number, status according to the real number. For example, you might status Yellow on revenue for Weeks 1-3 based on your best forecast. However, it might go Green in Week 4 once you see the real number.
If a number is measured quarterly, you will status on a forecast all quarter, even if you have real numbers in front of you every week. For example, Green on revenue is $10M this quarter. You are able to pull a revenue number every week. Every week you will share the actual number with the team and select your status color based on your forecast. Week 1 might only have $300k in revenue, but you still feel confident to hit the $10M by quarter's end, so you status Green.
The ultimate goal in measuring KPIs in Rhythm is to put the right metrics in front of the executive team during the weekly meeting. This gives them the ability to know when and where to make swift adjustments in order to keep the company on track to Green results.