HABITS OF THE FASTEST GROWING COMPANIES
Setting Effective Key Performance Indicators
How often does failure of staff to meet Key Performance Indicator’s (KPI’s) trouble you as a business owner/director/manager? Or perhaps a more positive question; if every member of staff consistently met & exceeded their KPI’s, what impact would this have on the business?
Often, the underlying reason failing to meet KPI’s in a business, is that they are incorrectly set. The cause of this being fundamentally where a business’ focus is. Let’s take the example of a sales-person. Many sales-staff are given KPI’s around the amount of sales they need to do, or revenue they need to generate. For instance; Joe Bloggs is a door-to-door salesman and the business gives him a KPI of £100,000 worth of sales in a 12-month period.
With a KPI like this, it is very easy for Joe to not reach his target. The reason being that the KPI has been derived from an Outcome, rather than Source activity. The fastest growing companies that we work at Shirlaws understand that if you focus on Source activity, the outcomes will look after themselves. So sticking with the analogy of Joe for the moment; if his KPI’s were; number of doors that Joe needs to knock on in a 12-month period, this KPI is much more achievable. Obviously, the business still needs to generate £100,000, however if Joe reaches his KPI and the Outcome target (£100,000) isn’t reached then the business can find out why and address this. For instance, Joe knocks on enough doors but doesn’t have a good conversion rate, so the business gives him intensive conversion training. Low and behold, he is then far more likely to achieve his KPI.
It’s a very simple principle that is rarely adhered to properly, accept in those businesses that really tap into their potential. The reason being is that for leaders, implementation is a mind-set, rather than just a one-time policy/procedure that is rolled out. To work with people at purely a Source level, requires leaders to coach rather than tell their staff how to perform. It requires consummate people skills and an underlying vision in the business that drives everyone’s why. Shirlaws highest growth clients, similar to the likes of Google, have absolute clarity on their business vision and the underlying why in the company. In turn, this new found clarity enables a leader to train and effectively cascade this understanding to their people. The KPI’s are simply just the process (the outcome) that supports a greater depth of thinking by an individual, team, board and business.