A KPI stands for Key Performance Indicator. They are there to help you measure your results in attaining your goals. The KPI's are always quantifiable. You define KPI's for your most critical strategic goals (strategic level). For the strategic level there may not be many KPI'S needed. But when you start to translate the strategic KPI's to a more tactical and operational level you are going to see a lot more KPI's.
KPI's for strategic alignment
KPI'S should help your organization measure it's success and help drive their purpose and improvement efforts. To do this each level of your organization needs to know how their KPI's relate to the strategic KPI'S. It is also imperative that people feel they have influence over the result of their KPI. When everyone feels they can influence their KPI's and knows how it helps the company, setting priorities and making choices will become easier (unless your strategy is only a reality on paper).
For instance when you have made a business model canvas or another strategy plan you will have identified how to measure success. When you have these high level KPI's it will guide people to look for results on those KPI's first. It will also give people a common purpose and shared language.
How to define a KPI?
For defining KPI'S you always need to start with the high level KPI's and then translate it to your team, project or business line. It is important to keep in mind that KPI'S need to be:
This will help in staying focused on the right things. You may not be able to translate a top-level KPI in a KPI for your team because you cannot make it SMART. If this is the case please look for the root cause and determine whether this is because:
- It is not an achievable KPI for you. This is either because the bar is set too high or because you have no or little influence over the KPI
- The high level KPI lacks in SMART definition itself
- You lack the information or tools to measure the KPI
- Measuring the KPI will take a lot of extra time and you are wondering whether it is worth it
- ...maybe there is another reason
Once you have found the root cause talk to your stakeholders about how to proceed. Just defining a KPI because someone said you should, will not work out well for you. It will demotivate you and the team, cost a lot of time to measure and still lead to unhappy stakeholders. A badly defined KPI will have the same result.
Alignment of KPI'S
Once each team has defined their KPI's there needs to be an alignment check. Do all the different KPI'S match up with the strategic goals? Are there KPI's which may lead to competing interests? Are there KPI's that may work to accelerate each other?Are all of the KPI's SMART? And most importantly of all:
- Does everyone feel that when we reach the goals stated in these KPI's we will also reach our strategic goals?
- How do we work together when KPI's are lagging?