How the correct KPI's is like shoe shopping
I am asked often which KPI’s (Key Performance Indicators) are needed for any given client’s business. When asked, I then share the shoe buying experience. Before I delve into the analogy let me share some background.
In a small business priority KPI areas are often obvious, they need include the value of sales made, profit, cash flow, stock levels, customer satisfaction and sales conversion rates. Larger organizations still retain the same KPI’s but held in different departments and not openly shared or available across the whole organization. For instance the manufacturing cell department for widget x may want to concentrate on their operational KPI’s, the procurement department on delivery performance and cost reductions, IT and marketing on separate metrics.
Through company growth phases such as start-up to establishing market maturity, new technology opportunities exist to implement new relevant KPI’s that need to be identified in such areas as improved efficiency, increased productivity, brand metrics to steer the business in boosting its profits and even improve the staff retention and employee development skills. There is great importance to retain a global focus on how each of these separate KPI shall contribute to the business goals and objectives.
OK, now let us look at the steps of buying shoes and explore some similar sounding questions to the correct KPI selection for your department or business.
How to buy?
1) How long shall I browse the market and research types of shoes available?
2) Do I buy online with a good returns policy or do I go to a shop to try out the shoes?
3) After selecting the shoes at a physical shop do I still buy online or purchase from the best provider in the high street or mall?
4) Before making the final purchase decision it is good practice to visualize how the shoes will be used and what concluded benefits we see in their selected purchase.
What to buy?
For any pair of shoes we are going to buy, new questions need to be addressed.
Are you seeking for a special event performance improvement?
What environmental conditions are you expecting to wear your shoes in?
For how long do you want your shows to last for?
Do you have a personal preference regarding style, color, material and comfort?
Are you seeking 1 pair of shoes or several?
What size feet do you take?
Are you a wide or normal size fit?
Do you wish to have extra options like spare laces or polish?
Is there a special grip you need depending on the surfaces you expect to use the shoes in?
Will you have no socks on, tights, thick,thin or normal socks when wearing the shoes?
What level of budget have you set aside to buy the shoes?
Will they need to be waterproof, provide ankle support, protect the toes in any special way?
All of these are important some to a higher and lesser degree to the person buying shoes.
In conclusion, the shoes do need to fit, however you may need to make some compromises.
If we apply the above analogy to decisions on KPI’s we can see it is relevant to go back to the business mission and vision. What is the end destination the business wishes to bring itself to? From this question the answers will drive pointers the correct and most relevant KPI’s. Consideration needs to be made to external macro impacts to a business. These factors can bring a higher or less importance to certain KPI’s, depending on PEST requirements (Political/Regulatory, Economic/Environmental, Social, Technology). So, a business in China may have a higher need for staff retention KPI’s, or a business in India may have electric supply continuation KPI’s and a business in Ireland may have a skills development KPI, these are all specific and relevant to their business in achieving the end goal objective.
It is clear that some KPI’s at first appear to be universal and yet their significance may have variable weight. We see this in measures of waste, quality, profitability, cash flow, customer satisfaction and innovation to name just a few.
2 starting key elements in deciding your KPI is to understand some basic factors in KPI design.
1) The KPI should be described where possible in a numerical value, ratio or percentage.
2) Is the KPI a measure of an end result or management of ongoing performance.
If you are seeking new shoes then please use my above tips!
Find out more on Metrics - Click below