KPIs gone WILD! -- Mark Wardell

‘KPI’ is an acronym every business owner should know and use often. That’s because a KPI, or Key Performance Indicator, is a telltale indicator you can use to track and measure your performance- across all areas of your business.  This is critical because when you know how to measure your performance, you hold the key to knowing how to drive a more successful business.

The challenge is to find the KPI(s) that are meaningful in your business. Here, I’ll show you what questions to consider, as you set out to discover the most telling measuring sticks in your own business, so you can track and chart your business performance in a meaningful way. But first, a brief illustration to help you understand the power of the KPI: I call this story, KPIs Gone Wild.

_ _ _

The other day, I took a trip to a major sporting good store in pursuit of golf clothes.

As I approached the staff to ask where the golf clothes were, not one but three staff members mumbled something about the back wall, without turning away from their conversation. No customer service whatsoever.

After tracking down another staff member on the outskirts of the golf section I asked for assistance to get into the change room to try a few shirts on. Yet another staff member let me into the change room muttering something about “don’t bring in more than 3 items.”

I was rather shocked when that same very unhelpful ‘change room’ staff member came up to me in the cashier line up and asked if she could put ‘her sticker’ on my clothing labels before they were rung through.

Why, I asked?  “BECAUSE IT WILL TELL MY BOSS I’M DOING MY JOB”  (An exact quote.)

_ _ _

Now, understanding the retail landscape, I’m sure there is commission involved, but the way her performance is being calculated and the way her manager is drawing conclusions is fraught with issues.

In this store, the KPI of how many customer stickers each staff achieves is meant to improve customer service. Unfortunately (for this business) when you have staff simply chasing metrics, the overall goal of the company is not being served.

Bottom line:  It’s essential to choose the right KPI and to continually work with staff/managers to ensure that you are actually measuring and monitoring something that will help propel your business forward.

To find a meaningful KPI, a business first needs to know its Strategic Objective well. What is the objective of your business? If it’s to offer unparalleled customer service, the KPI you use will reflect a high level of customer satisfaction.

For example, British Airways lists departure punctuality of aircrafts as a primary measure, as high performance here requires other operational processes to run smoothly and also because it is a key driver of customer satisfaction.

Conversely, if your Strategic Objective is referral-based, your KPI needs to reflect this. A major electronics store we work with uses this system:

1. Every single customer who buys something is sent an email from the store, asking them to rate their experience by answering one simple question: “On a scale of 1-10, would you recommend our store to your friends?”


2. Anyone answering below a 6 or 7 is personally contacted to determine how that experience could be rectified or changed.

Not surprisingly, this KPI has been extremely helpful in facilitating greater referrals for this chain of stores.

The bottom line here is that a meaningful KPI should focus on a performance measure specifically related to key activities of the business. So that, successful completion of the activities of the KPI will have the effect of improving overall company operations and directly contribute to profitability by reducing inefficiencies associated within the targeted business process.

So, the question for you to ask is, what activities in your business say the most about your overall performance? You may need to carefully consider and even potentially reevaluate your systems to understand what KPI(s) will be the most meaningful to your business. Invest some time understanding your business, and you’ll soon find a meaningful KPI. Once you do, you’ll hold the key to a more successful business.

 

Mark is President & Founder of Wardell Professional Development (www.wardell.biz), an advisory group that helps business owners plan and execute the growth of their companies. The author of seven business books, Mark also writes regularly for several national business publications, including Profit Magazine, the Globe and Mail, and CGA Magazine. Email him at mark@wardell.biz