A common stumbling block for businesses trying to reach the horizon and beyond is that they lack a tactical plan for achieving their goals, or struggle to communicate such plans effectively throughout the business.
Implementing efficient key performance indicators (KPIs) can help turn your goals into a reality.
How to identify and set KPIs for your business
Identify your high-level goals
Think about where you are now and where you want to be in the future. Express your aspiration using ‘SMART’ goals.
Decide what KPIs to set
Identify the key factors that are required to achieve your goals and ask yourself, ‘how can I measure each goal and make sure that it is attainable?’ Your KPIs should then work backwards from each objective, establishing key milestones and guideposts along the way.
Share your KPIs with your staff
It is crucial for all employees to be aware of and understand the business goals to ensure they know what they are working towards. Furthermore, it is essential to help employees recognise how their individual input contributes towards the overall goals of the business.
Monitor and share progress
Where performance is measured performance improves’. Results should be shared and examined for the lessons that can be learned as well as the actions to be implemented. This should include both positive and negative items where appropriate.
Through this process, the focus of the individuals and teams can be brought in line with the business’s goals. This step is critical to ensure your KPIs become a genuine guidepost for employees.
Ensure any KPIs are reviwed and updated regularly
Businesses and markets change constantly and, where appropriate, your measures should too.
A word of warning: obsessive focus on one aspect of the business could lead to decisions which have a negative impact on other areas. For example, a focus on top line turnover could lead to reduced margins as staff offer greater discounts to hit their performance metric.
Furthermore, linking KPIs to incentives (such as a bonus, pay rise or promotion) can lead to detrimental consequences. The true purpose of a KPI is to help people inside the business know where they are in relation to where they want to be; they act like a compass.
Once KPIs are linked to incentives, they can stop being a navigation tool and become a target an individual must hit. When this occurs, the people involved can become creative in how they can manipulate the information or their behaviour to ensure they receive the associated incentive.
How to navigate uncharted waters
Setting out your KPIs and making a start is the ideal, however, it is not always that straight forward.
The past two years, as well as more recent global events, have clearly demonstrated that anything can happen, and that businesses need to remain adaptable and be prepared for all eventualities. Taking a moment now to review your plans can help ensure your business is able to thrive in this changing economic climate.
In times like these, business owners should home in on what is truly important to how their business operates.
- Start by identifying the key products or service lines that are essential to the success of your organisation.
- Next, establish the key resources that are required to provide these offerings - this could be labour, capital assets, raw materials and/or logistics.
- Third, create robust contingency plans to ensure the continued availability of each key resource as required. Thought should also be given to the best allocation of any resource if it is in short supply to ensure it is deployed in the most effective manner.
Business plans and KPIs will provide staff and management with direction and focus, helping them to set their sights on the horizon. Running a business without a robust plan or monitoring key metrics is akin to setting sail on a ship without a rudder or a destination. Utilising these things will help ensure everyone knows where they are, where they are going and what role each person must play in ensuring a successful voyage.
Hazlewoods has created a business plan template should you need help getting started with the process. To request a free, no obligation copy, please email marketing@hazlewoods.co.uk . For further advice regarding effective planning, please get in touch with Associate Director, Adam Shearing.