How to Find the KPIs That Really Matter
A Harvard study of 157 businesses revealed that only 23% had completed in depth analysis to set the right KPIs (
Source). Using generic or assumed KPIs can result in measuring the elements of your business that have little/no impact on your performance!
So how do you narrow it down to the “critical” KPIs? Here’s what we recommend:
1. Define your business objectives
Define the specific objective/s you want to achieve & how the achievement of those objectives will be measured. Make sure all critical functions of the business are covered:
- Sales – “Generate $1,000,000 in sales revenue.”
- Sustainability – “Keep ‘billable” visits at or above 20% of all visits” or “Initial Assessment visits should equal or exceed Delivery visits each month.”
- Quality – “Maintain an overall patient satisfaction rating of 93% or better.”
- People – “Increase employee engagement by 10%.”
Use your “gut” test to ensure you
have a complete set of objectives. Ask yourself, “If we achieve these outcomes would we classify ourselves as a “successful” business? If the answer is “no” – define the missing functions and/or objectives.
2. Model your business objectives
Model the input drivers that impact your objectives. For simplicity we’ll assume we have one orthotist and one prosthetist on staff.
By looking at your business operations and the data you have around your processes, you should be able to take the concept demonstrated above and map out the flow as it relates to your business. In the example above, we have identified the critical KPIs that we need to measure: Total Sales Revenue, Revenue by Specialty and the Number of Active Patients.
3. Allocate KPI accountability at the right levels of the organization
As you move from left to right across the model you can identify the KPIs that need to be set & managed at each level of the business.
The CEO is accountable for total sales revenue. The Practice Manager is accountable for Revenue by Specialty. And the individual practitioner’s are responsible for their “book of business” or the number of active patients in their rotation.
By allocating KPI accountability at the right levels we can set targets that align the organization & drive achievement of the $1,000,000 sales revenue objective.
Everyone from the practitioners to the CEO is aligned on achieving the Revenue objective. Everyone clearly understands what they need to achieve, in order for the business to reach its objective.
4. Frequently review and validate your KPIs
As your business changes, improves & grows your objectives and key drivers will change. It’s critical to refresh your model on a periodic basis to ensure you’re measuring the right KPIs at all levels of the organization.