Here’s some food for thought: If you’re not constantly reflecting on your business priorities and goals and redefining how you’re measuring success, how do you know where to go? And how can you tell if you’re headed in the right direction?
In order for an organization to grow and succeed, there needs to be a constant focus on improving upon what you’re doing.
Year over year (or even more often than that), executive leaders need to measure and analyze performance metrics to figure out if results align with the direction the business should be going in.
How do you assess that? It all stems from setting the right goals and identifying the metrics that match those goals.
What we’re talking about is Key Performance Indicators (KPIs). Just ahead, we’ll introduce a simple framework for setting KPIs in your business.
Why are KPIs so important?
Business schools teach that you can’t manage what you don’t measure, right? So, identifying relevant metrics is a critical first step of a growth plan. If you are measuring what matters, you’re on the right path to growth and scalability.
KPIs help decision-makers track and monitor progress and see where there may be opportunities for improvement. KPIs act as a north star that help teams stay focused on their mission to succeed.
Perhaps the strongest argument for running a business based on KPIs is that data is neutral and keeps everyone on the same page. In other words, a culture built on data means that decisions will always be backed by the numbers versus being driven by emotions.
Identifying the metrics that matter
It’s easy to understand why KPIs are necessary but it’s harder to put into practice. We’ve developed a framework for setting and implementing KPIs that’s simple and easy to follow.
But first, you must identify which areas of the business are important to your bottom line. While every business has different priorities, they are all generally looking to evaluate their performance in the following areas:
- Finance
- Customers
- Sales
- Marketing
- Operations
- Internal Teams
Don’t make the mistake of overanalyzing data or placing an importance on areas of the business that aren’t significant for you. For example, if you don’t have a robust sales team, it doesn’t make sense to use manpower to evaluate sales data that ultimately won’t be used. Instead, shift that focus to your finance metrics or some other area of your business.
Once you know which areas to focus on, determine which metrics paint the most clear picture. Here, quality over quantity is the name of the game. This is where the framework we’ve developed can help you make sense of the KPI process.
The IDEAS framework
Introducing IDEAS. This simple, but effective framework can help you define success on YOUR terms with the right metrics that are specific to you.
- Identify the problem
- What is the problem that you want to solve? Or what do you want to prevent from happening? By starting here, you can tie metrics directly to your desired outcomes.
- Determine what solves the problem
- Now that you’ve identified your issues, what are the indicators that might mean progress towards a solution? For example, if you’re looking to improve CSAT scores, maybe Average Time to Response is a metric that’ll help you make progress.
- Establish your KPIs
- Knowing your issues and what can help you solve them is how you’ll determine the KPIs that are right for your business. At this point, consider where you’ll find the data you need (i.e. what tools can help you track your data?).
- Analyze the results
- Now that your data is in, it’s time for a gap analysis. How do your actual results compare against benchmarks you’ve set? Where can you fill in the gaps? Perhaps you need a change in processes or to invest in additional training for your team members.
- Start from the beginning
- The process of setting and tracking KPIs is ongoing. On a regular basis, you should assess your results, see what you can learn, and then start the process over.
Once you get in the habit of following this framework, there’s no turning back. Constantly defining (and redefining) and implementing KPIs means you’ll have your priorities in order and be in a position to succeed.
Your organization’s specific teams each play a significant role in your overall success, so make sure you’re measuring metrics from all corners of the business.
For more on implementing KPIs in your business - including some example KPIs for each of your teams - check out our whitepaper, ‘How KPIs Can Improve Your MSP Business’.
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