Benefits of Having the Right Metrics / KPI (Key Performance Indicators)

Benefits of Having the Right Metrics / KPI (Key Performance Indicators)

In a previous article, I discussed how to Identify Your Metrics (Key Performance Indicators). Now let’s look at the benefits of measuring the right Metrics for your organization.

(Note: I use the terms Metrics and KPIs interchangeably – but prefer to use Metrics these days in an effort to reduce the use of 3 letter acronyms).

The right metrics drive your business model (“Business as Usual”).

In every functional area of your business, you should be able to identify a small handful of Metrics that drive the outcomes you seek on a day to day, and week to week basis. By functional area, I am referring to departments like marketing, sales, product development, operations, customer service, finance etc.

Once you get clear on the “Result or Outcome” you want in each functional area, you can drill down to determine the “Activity” and “Effectiveness” measures that drive these results. Results are important but you can’t “manage” results. However, you can manage the activity and effectiveness of your people in order to achieve those results. These metrics form the critical success factors that drive your business model.

The right metrics clarify performance expectations.

According to research from the Gallup organization, employee engagement begins with each employee being able to strongly agree with the statement, “I know what is expected of me at work”.

Having the right Metrics (KPI) communicates “what is expected of me at work” in a clear and unambiguous manner.

I strongly recommend you involve your people when selecting the right metrics, and use a traffic light to color code performance. Negotiate realistic “red” (bad), “yellow” (watch closely), and “green” (good) performance thresholds. Involving your people when setting SMART Goals achieves alignment and buy-in. Everyone agrees on what a good level of performance looks like.

Here’s what to do when you have roles that are harder to quantify. In those cases, if you are struggling to come up with something worth counting, then I recommend you focus on closely managing that person’s Projects and Tasks instead.

The right metrics focus people’s attention on what is important.

Employees are faced with many competing demands on their time. When they know the small handful of Metrics that grade their performance, it keeps them focused on doing the right things, especially if they know that their performance is visible to their peers, and even more importantly, if there are consequences for below standard performance – ie they know their manager is going to discuss their score at the next weekly meeting. 

The right metrics help you to manage people more objectively.

Metrics provide objective measures of performance, and this data enables you to “manage by fact”. Good performance is not about working long hours or being busy. What does the score say? It’s about the results people are achieving.

As a manager, you need accurate Metrics data in front of you (or other data that objectively grades each person’s results) so you know what sort of conversations you need to have with each team member in order to manage and coach them effectively. You can see which people need praise and acknowledgment, and which people need coaching and support.

The right metrics drive business execution.

When you keep your Metrics scores up to date and visible on your dashboard and hold people accountable to achieve these scores at your weekly team meetings and 1-on-1 meetings, this helps ensure consistency of performance and consistency of outcomes.

Larry Bossidy, former CEO of AlliedSignal, and co-author of the book “Execution – The Discipline of Getting Things Done” remarked, “When I see companies that don’t execute, the chances are that they don’t measure.”

I think Larry’s quote is incomplete. I would add additional 3 words, “… chances are that they don’t measure the right metrics”.

The right metrics help you run more effective meetings.

You need good data to a good meeting. Otherwise, you are wasting your time, as well as wasting the time of those attending. This is an area where I see many managers struggle. They try to run meetings, yet much of their data is either out of date, missing, or inaccurate.

I strongly urge clients that your Metrics (KPI) dashboard must always “tell the truth” as you go into your weekly team meetings and 1-on-1 meetings. If your dashboard is not up to date it greatly loses its power to motivate your people. 

Keeping the data current, making performance visible to the team, and discussing the scores every week is a proven factor for management success.

Unfortunately, if you don’t have the latest Metrics scores the manager:

  • can’t see which areas are performing well, and which areas require attention
  • can’t see which people are performing well, and who needs help and support
  • can’t have meaningful discussions about performance
  • can’t make well-informed decisions

The right metrics help you to hold people accountable.

Here’s another area where I see many managers come unstuck. They may have good data on their KPI dashboards, but they fail to close the loop.

I have a saying: “Successful Business Execution is 20% giving people clarity about what needs to be done, and 80% following up to make sure it actually gets done”

Whether you use software dashboards or excel spreadsheets, you must run effective meetings every week to discuss the Metrics scores and coach your people accordingly. If someone is struggling, here is my recommended approach:

Talk to the non-performer in a non-threatening and supportive way by stating the observable facts that are visible on your dashboard or spreadsheet, and then ask some version of the following 3 question coaching sequence:

“I see the number of sales appointments you booked last week was ‘in the red’ last week. What’s happening here, Bob?”

1. What’s happening here?

Listen to understand. There may be a valid reason for Bob’s appointment numbers being “in the red”. Make sure you hear him out. 

2. What 1 thing can we do this week to improve this?

Let Bob come up with solutions first. Then suggest others. Work together to come up with at least one tangible action, and capture it as a Task. Follow up next week to make sure the Task(s) got done, and assess the impact on Bob’s performance.

3. What support do you need?

Make it clear that you are on Bob’s side and that your role is to support your team members to be successful.

Don’t assume that providing feedback and holding people accountable is a one-time event. You must follow up to ensure the agreed actions have been implemented and that performance has improved. You must keep providing feedback in this exact same manner every week until a sustainable long-term change has taken place.

Holding people accountable for achieving the target level of Metric performance every week is vital to ensure the team (and individual) is on the right track.

But making progress on your Metrics (KPI) is not just about demanding accountability. Your job as a manager is to coach support your team to achieve their goals. Remember, you only succeed as a manager when your team succeeds.

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Until next time…
Stephen