It's extremely important to measure progress in your small business. There are so many ways…
How Do I Know if a Performance Measure Is Key?
In my previous Smallville article, I recounted the story of Martin – a business owner whose business had 300 KPI’s. Keeping track of these ‘key’ performance indicators was costing his business a small fortune, and countless hours of lost productivity. Martin had lost the meaning of the ‘K’ part. ‘K’ stands for ‘key’, which means critical to the business.
While we may have a quiet snicker to ourselves about someone actually having 300 KPIs (you wouldn’t do that – would you?), there’s an implicit question here that we all need to ask ourselves. “How do I know what measures really are ‘key’ in my business?”
Finding the key.
I have followed Stacey Barr, a Performance Management Specialist (who introduced me to the Martin case study), for several years after attending one of her workshops, and have implemented her methodology in my own businesses. The essence of Stacey’s teaching is that your ‘key’ performance indicators must be the ones that have the greatest influence on your Vision, Mission and Goals. By default then, if you can’t clearly enunciate your Vision, Mission and Goals, you can’t create meaningful KPIs.
If you aren’t clear on your Vision, Mission and Goals, you can’t create meaningful performance measures.
The Goodies and the Cheshire Cat.
In my Small Company, Big Business workshops, I ask everyone to introduce themselves and their business by giving their elevator pitch. That’s the 30-second reply you give when someone asks, “And what do you do”? In one of these workshops, a business owner replied that they do, “anything, anytime”. Those of you of a certain age will remember the BBC comedy, The Goodies. Their theme song contained the lines:
D … we’ll show you definitely
Y … you should employ us three
We … can take on any old line
Anything anytime, hi hi hi.
Anything, anytime? What chance did this company have of setting any KPIs – or any performance measures at all for that matter? A timeless piece of advice from the Cheshire Cat to Alice in Wonderland sums up this business succinctly.
“Would you tell me which way I ought to go from here?” asked Alice.
“That depends a good deal on where you want to get”, said the Cat.
“I really don’t care where”, replied Alice.
“Then it doesn’t much matter which way you go,” said the Cat.
Does the measure relate to the Vision, Mission and Goals?
So, step number 1 in setting your KPIs is being clear on where your business is going. Then, you can create the indicators that will measure your progress. Some of these will be critical (key) and others won’t.
The best way to illustrate this relationship is probably through an example. In our consultancy company, our mission is ‘To help our clients obtain production from our natural resources with the least possible environmental impact, by using good science, to the highest levels of scientific and ethical integrity’.
To support that Mission, one of our Goals is ‘100% accuracy in reports’. For us, this is a ‘K’ PI. Without accurate reports, our clients simply cannot make appropriate planning and production decisions. Hence, we have a data and report checking Process with Procedures detailing what has to happen to get that 100% accurate report to the client.
So, the process for creating a KPI looks like this.
The secret to setting meaningful and successful KPIs is at that decision point. Is this a critical success factor for your company or not? Will failing on this goal stop you from achieving your Mission and Vision?
I’m sure that you will have heard the business maxim that, “You get what you measure”. It’s true. Setting the wrong KPIs risks sending your company off in the wrong direction entirely, or simply measuring everything without purpose.
I’m going to call this the ‘Martin Trap’ from now on in honour of Stacey’s client Martin and his 300 KPIs.
Don’t be Martin. Never be Martin.
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