Measuring Change: Why Managing Key Performance Indicators and Business Goals Matters
When working on improving your business, establishing a measurement of success is essential in mapping out how you are going to get there.
Understanding the principles behind key performance indicators can help you establish your business goals and track your performance so you can adjust your strategies to meet them. There are three core things to keep in mind when setting up KPIs:
- Goal setting and defining success: Ask yourself why it’s important to measure success and what makes a well-defined goal. Having the answers to these questions will help you set specific goals with realistic expectations.
- Developing KPIs: In establishing your goals, think about how you will measure success. This will help you create KPIs that are attainable and follow actionable steps to achieve your goals.
- Tracking Progress and Adjustments: KPIs aren’t something you set and forget. Constant monitoring helps you view progress and adjust your strategies and expectations depending on performance.
In this blog, we will dig into what KPIs are, why they are important, how you can set them up, and provide some real-life examples to help guide you on setting up and tracking your progress as a business.
This is Part One of a two-part series. In Part Two, we discuss some Microsoft tools you can use to help establish goals and set up KPIs.
What are Key Performance Indicators?
Key Performance Indicators – or KPIs – are concrete change management metrics you can use to evaluate progress for individuals, teams, or your entire organization. They are indicators of success in achieving specific objectives and help you adjust your strategy based on concrete results.
Why are KPIs and Goal Setting Important?
Simply put, having a solid foundation of well-defined goals that are consistent across your organization will help you grow and improve. KPIs factor in because they help you identify areas of improvement while simultaneously celebrating areas of success. Establishing a clear vision that combines goals and KPIs will help your business both in the short and long term.
Anchor Your Efforts with Well-Defined Goals
Goals provide a clear direction and tangible objectives that everyone in your organization can work towards. They also provide a sense of purpose and direction, helping your team members focus their efforts on achieving specific outcomes that will propel your business forward.
Setting goals promotes clear communication among team members, ensuring everyone is on the same page and working towards the same objectives. There are five key elements to setting up well-defined goals that are S.M.A.R.T:
- Make them SPECIFIC: Your goals should be clear and concise, this defines what you want to achieve and ensures your team is on the same page in understanding what your goals are, why they are important, and how you will achieve them.
- Ensure they are MEASURABLE: Your goals should be quantifiable, and they should be set up so you can track them with an actionable metric. This helps you see how well you are performing.
- Set them up to be ACHIEVABLE: Make sure your goals are realistic and within reach given your available resources. Establishing what’s possible and what’s not, will lead to more successful outcomes, which boosts morale.
- Keep them RELEVANT to your business: Make sure your goals align with your overall strategy and contribute to larger objectives.
- Establish TIME-BOUND deadlines: Giving your team a specific deadline or timeline for completing goals helps establish a sense of urgency. It also helps with tracking.
Develop KPIs that Make Sense to Your Business
KPIs go hand in hand with goals, as they track your progress while you achieve your goals. They also allow you to adjust your strategies and goals as needed. Perhaps you find that you’re not meeting targets with a particular strategy. KPIs will tell you what is not working, while the work is ongoing so you can adjust in the moment.
Conversely, KPIs will also tell you when you are successful in meeting your goals, which allows you to aim higher when necessary and celebrate your team for their success.
KPIs should be relevant and meaningful to your business objectives and help you track progress towards achieving them effectively.
Aligning Goals and KPIs
The first step in developing KPIs that make sense is to align them with your goals. This allows you to measure progress effectively. There are two main ways to achieve this:
- Identifying the right metrics: It’s important to choose metrics that are relevant, measurable, and can be tied to specific goals. This step is crucial in measuring success and progress.
- Document baselines to map out where you need to go: Baselines give you a starting point that you can use as a reference when comparing where you started. You should do this before establishing concrete goals.
Below is an example of a scorecard to help you in aligning goals and KPIs:
Goal Setting and Key Performance Indicator Use-Cases
Now that you understand the principles behind goal setting and establishing KPIs, let’s break down some examples of how you can use these in action.
1. Enhancing Sales Performance
In the first example, a business sets the large objective of increasing overall sales revenue within the span of its fiscal year, so it decides to implement a new sales strategy. Here is an example of a goal this business could set to help meet its overall objective:
- Goal: Increase lead-to-sales conversion rate from 3 percent to 7 percent
- Potential KPIs: The KPIs this business would set up could track team or individual sales rep performance. They could include measuring lead qualification rates, the number of leads generated, sales representative conversion rate, and customer follow-up rates, just to name a few.
If the numbers on these KPIs go up under the new sales strategy, this company’s lead-to-sales conversion rate will likely go up too.
2. Improving Manufacturing Operations and Increasing Customer Satisfaction
Next, a chemical manufacturing company is looking to enhance its production efficiency and its on-time delivery rate to boost customer satisfaction. With those two things being their large objectives, they could set some goals and KPIs to help them do that:
- Goals: To decrease the production and delivery time of specialty chemicals from 12 weeks to 8 weeks, and to score higher than 4 out of 5 on their customer satisfaction surveys.
- Potential KPIs: For the production and delivery goals, you can set up KPIs to track cycle time per batch, production yield, first-pass quality rate, order fulfillment cycle time, and shipping accuracy rate. For customer satisfaction, they could set up tracking for customer satisfaction scores, average delivery time and accuracy, and customer retention rate, to name a few.
By aligning their KPIs and goals, this chemical manufacturing company can use specific metrics to judge how well they are doing in meeting their goals.
3. Increasing Marketing Engagement
In this example, a company wants to increase engagement with its monthly newsletter and is adjusting the format using best practices in email design. The ultimate objective is to drive more leads with the newsletter. The KPIs and goals this organization could implement include:
- Goals: This company can establish goals to increase the open rate of their newsletter from 17 percent to 20 percent, their click-through rate from 1.5 percent to 2.5 percent, and their click-to-open rate from 9 percent to 12 percent. Additionally, they set up a goal to increase their newsletter leads by 15 percent each quarter.
- Potential KPIs: Most email marketing tools have built-in tools for tracking KPIs, which leads to automatic alignment. You can view metrics for each email and check how things are going with the open, click-through, and click-to-open rates. For leads, they can use tools to set up tracking for the number of leads that come through their pipeline and monitor and record quarterly increases.
By setting up KPIs that track metrics directly related to their goals, this company can accurately measure their success and test multiple marketing strategies to find the best fit.
How to Adjust Your Approach
The reality of goal setting and KPIs is that you might not always meet your targets. While this could be discouraging, it also presents an opportunity to get creative in adjusting your methods and strategies to achieve better results. Adjusting your approach in response to obstacles ensures your efforts remain effective and aligned with your overall vision. There are three key parts to adjusting your strategies:
- Be adaptable: Stay flexible and realistic in adjusting targets. If you think you set your goals too high to start, keep that in mind when changing things. Showing a high level of adaptability helps you overcome challenges and meet goals.
- Track Progress: As we’ve discussed at length in this blog, tracking your progress is paramount in meeting goals.
- Respond Quickly and Decisively: When you come across a roadblock to your progress, pinpoint the problem quickly and pivot strategies to maintain momentum. It could be a good idea to consult your team on strategy changes to ensure they remain involved.
Ready to Start Setting Up Actionable and Smart Goals and KPIs? Reach out to Stoneridge!
Goals and KPIs are connected to virtually every aspect of business. Stoneridge experts are experienced in helping clients optimize and improve their processes through innovative technology and specific goal setting.
Reach out to our team today to start setting smart and actionable goals to drive your business forward.
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