As we become more data-driven, we add more and more KPIs (Key Performance Indicators) as metrics to guide and manage the whole business. But do you have the perfect KPIs? Or will you fall into one of the many metric related pitfalls? And are you observing reality? Or are your KPIs clouding and obscuring the view? In this episode of the Retail Transformation Show podcast, join Oliver Banks and discover the essential factors to define your perfect KPIs to drive success across your retail business or company.
Listen in to this podcast episode to discover:
- The common pitfalls and challenges when it comes to using and managing KPIs.
- Why you don’t want good KPI performance.
- The different elements to help define your perfect KPIs.
Essential elements to the perfect KPI
If you’re looking for the perfect KPI, you must factor in a number of different considerations:
Your KPIs should match your strategy
Your KPIs should help you reach your destination. So it’s critical that they’re aligned to your company’s goals or mission. Afterall, what’s the point in tracking your speed if you’re going in the wrong direction?
Don’t copy KPIs, be unique
How are your KPIs relevant to you? Many businesses use KPIs and I’m sure your competitors do too. But don’t just copy them. Your business is different to their business. Your customers are different. Also, your challenges and opportunities are different to theirs.
So make sure that your KPIs are focused on the things that will make your performance great.
Finding a blend of leading and lagging metrics
Lagging metrics are a measure of the performance that has been achieved. The outcome has happened already and you’re recording and watching history.
But leading measures are about predicting future performance by reporting the performance of the inputs. There is still time to make a difference and positively impact the outcome (or lagging measure!).
Most companies have a lot of lagging measures. So you’ll want to challenge yourself to add more leading measures.
Track KPI performance over time
For your KPIs, you need to monitor performance over time. Don’t just look at a single moment in time in isolation. This doesn’t tell you the whole story.
Perhaps a KPI looks ok – but actually, looking at the trend shows that you are quickly spiralling out of control. Maybe a measure is performing badly – but maybe you’ve been making rapid progress and have already taken the right action.
Looking at a snapshot in time only tells you part of what’s going on. So be sure to look at trends, patterns and performance over time.
Limit the number of KPIs
Not every metric is a KPI. The “K” in KPI stands for “key,” i.e. the most important ones. But unfortunately, sometimes KPI can be a substitute word for “anything which can be measured.”
Instead, you must limit the number that you’re looking at to avoid confusion and to keep you focused on those that really make a big difference to your future.
Consider who the KPI is for
Each KPI should have a customer. Someone who is looking at the KPI and who is ready to take action. Retail companies are large and complex, requiring different people to monitor several KPIs each. Consider that a KPI to one person or team isn’t “key” for other people or teams.
Fully rounded suite of KPIs for all parts of the business
Don’t have all of your measures focused on only one part of the business. Instead, make sure that the selection of KPIs is fully rounded and considers all essential factors in the future success.
The Tesco Steering Wheel divided down into 5 sections, each with it’s own selection of relevant metrics. The 5 sections are:
KPIs must drive action
KPIs are about changing the future, not looking back at the past.
Sure, you may look back at the past to identify trends or patterns from history. Also, you may celebrate success, with a view of reinforcing positive behaviours so you can repeat that success again in the future.
Take a look at the design positioning of the dashboard in a car. It’s very intentional. It is positioned specifically for the driver. Dials and gauges are not positioned for the passengers to see. They’re not tucked away in the engine or boot or trunk. In fact, they’re specifically shown to the driver, alongside the relevant controls, so that they can take action based on them.
Now consider this… are your KPIs positioned for the people who will take action in a convenient way?
KPIs that drive the right behaviour for your culture
KPIs can drive different behaviours. And your existing culture will impact this too. So, if your culture is about compliance then that’s not going to motivate people to do more than the minimum.Or is your culture is around achieving the numbers and budgets at all cost, then that could encourage people to game the system and measure. (A stark reminder that people do not want the KPIs, they want the outcome).
Encourage collaboration and overcome silos with the right metrics
Your perfect KPI should unite the wider company. Not divide it.
Firstly, it must be understandable so people know what they’re looking at. It doesn’t need to be complicated. It shouldn’t be hidden away so people can’t see the KPIs and relevant performance. This will help bring people together and hopefully it is clear that it will help drive the company to the shared goals of the strategy.
In addition, it should actively look to avoid infighting and overcome the silos that exist in the company. (And not create new silo walls).
Get your KPIs ready for your future
Your KPIs should be ready to propel you into the future. Do they support your growth plans or proposed proposition?
Will AI be able to help you monitor different metrics. Is it helping with advanced analytics of historical data and forward forecasting? Will your system, help to automatically correct and adjust?
Final thoughts – improve what really matters most
There are 3 more considerations.
- What matters most – to your customers, your colleagues, your stakeholders?
- What would you love to measure if anything was possible?
- And what action would it drive to change the future?
For me, that final point is really the most important when it comes to KPIs. KPIs are really about changing the future. Not about living in the past.
Connect with Oliver Banks
If you’d like to connect with Oliver Banks, reach out by email: email@example.com
Or connect to Oliver Banks on LinkedIn (remember to personalise the invitation to let me know you listen to the podcast).
Or follow on Twitter (@ollie_banks).