How to Choose the Best KPIs to Track

Choosing a KPI

One of the most important and often overlooked decisions you make when you design your dashboard is which KPIs to choose. Typically, clients either choose any KPI they can find (what we like to call “the kitchen sink dashboard”) or pick random metrics that look good but don’t produce results. Choosing the right metrics to track is a delicate balance. You don’t want too many, but you need enough of the appropriate metrics to help you understand your performance. When you reach the right balance you will see the impact it has on your performance.

Here are a few things to keep in mind when designing your dashboard.

Think in terms of process

It isn’t effective to track every single metric in your business so you need to start by narrowing down the list. Start by thinking about your business in terms of adding value. What process in your organization actually adds value for the customer? Ask yourself, “Is my customer willing to pay me for this task”? For example, customers typically don’t want to pay you to produce a quote or bid but expect to pay for a product or service.

This is important because improving the processes that actually add value will have the biggest impact on your business and your bottom line. Too often companies track metrics that have little or no impact on how the customer perceives value, leading to minimal impact on your results. Of course, there are some non-value add processes you want and need to track, just don’t leave out the critical functions that have the biggest impact on your customer.

Choose Two Level Metrics

Once you have a short list of areas or processes to measure, it is critical to include at least two different KPIs to track for each process.

First you should select a metric that measures how you are doing. For example, when setting up a dashboard for your Customer Care process you may want to track your Net Promoter Score. This metric measures customer loyalty, and would be an excellent measure of “how you are doing”.

Next you’ll choose metrics that measure why your performance is higher or lower than expected. In the case of the Customer Care process, select a KPI to diagnose your current NPS such as On Time Delivery Percentage or Order Fulfillment Cycle Time. Without tracking root causes you and your employees will be guessing what needs to be done to improve performance.

“SWSWSWN”

This comes from a close friend who spent his career in outside sales. His motto was “SWSWSW-N” or “Some will. Some won’t. So what. Next!” It’s unlikely that all the metrics you initially choose will work. Some will work, some won’t. Replace the less-helpful ones and try again. Also, every organization changes and evolves. As the business grows and develops, your initial metrics may not apply anymore. That’s why this should be an iterative process, always testing out new metrics, or tracking KPIs to help resolve a short-term issue.

Bottom line? It takes practice to design and develop your KPIs and dashboards. The most important step is to start somewhere. We would love to hear what your experience has been – what’s worked, what hasn’t and where you would like to be.

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