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Are Your Key Performance Indicators (KPI) Strategic?

Plans are set, goals are defined, budgets are negotiated, and a new year begins.

Teams review their goals, their budget, and go right back to focusing on what their priorities were last year.

Sound familiar?

How does a management team ensure that their folks focus on making progress on the longer-term objectives while they manage ongoing operations?

For many organizations, the solution is to define KPIs or Key Performance Indicators, but how to you ensure KPIs reflect progress on longer-term goals?

The role of KPIs has evolved since its original development as a methodology for creating non-financial measurements of a particular activity or objective. Over the years, KPIs have been adopted for setting and evaluating the performance of individuals. However, like many brilliant management theories, when practiced, some brilliance is lost.

Too often, KPIs are not aligned with strategic goals or long-term objectives. They are data-driven, measurement-oriented factors that accurately report performance against primarily operational indicators and ignore factors for tracking progress for future success. They track how well you are doing against the status quo.

We find that to embed future goals in KPIs (or any annual performance metric) there must be a process in which teams reflect on strategic goals and clarify the role they play in achieving these goals. Teams must engage in Role Clarity.

Research from Effectory, a leading employee feedback company, reports that across all sectors, 50% of employees report a lack of role clarity.

How to Engage in Role Clarity with your Team.

1.  Role Clarity starts with a focus on the critical results each functional area must deliver for strategic plan success. Review the company plan and identify the three to four essential result areas in which your team plays a unique or collaborative role.
For example, if you are part of a sales team, then your team has a role in revenue goals, market expansion goals, and market awareness – you may also have a role in strategic partners if these are part of your organization’s growth strategy.

Your sales team’s Critical Result Areas (CRAs) are:

    • Meet or Exceed Revenue Goals
    • Lead Expansion into New Markets
    • Achieve High Levels of Awareness in All Core Markets
    • Seek Out and Win Key Strategic Marketing Partners
2.  Once Critical Result Areas are defined, explore how to measure success in each of these areas.
3.  Next, clarify the role your team plays in each of these areas and the method used to drive performance.

Role clarification uses action verbs like lead, participate, coordinate, monitor, manage, advise, etc.

Methods used to drive performance are processes like planning, cross-functional work groups, or management forums. They are also specific business activities like sales or marketing events, product development road-maps, forecasting, or decision-making, to name a few.

4. Then, articulate specific priorities for the next review period - typically a year - to incorporate current management priorities into this discussion. Constraints on resources are real, and so is the anxiety of taking on commitments you cannot achieve without more resources or until you finish the current set of priorities on one’s plate. By aligning current priorities with each critical result area, you bind them together and make prioritization part of the role clarity process.

This is the time to negotiate reducing focus on or the elimination of a legacy commitment to make room for a new priority or delaying a new priority until a current priority is complete.

5. Finally, discuss the allocation of effort and focus across all critical result areas. Using percentages, define how much time and attention towards each CRA.

Using the sales team’s CRAs as an example, their focus and attention might look like:
  • Meet or Exceed Revenue Goals – 60%
  • Lead Expansion into New Markets – 15%
  • Achieve High Levels of Awareness in All Core Markets – 15%
  • Seek Out and Win Key Strategic Marketing Partners – 10%

Applying % of focus and attention to each CRA clarifies importance and ensures consistent prioritization of time and resources across the team.

It also helps demystify the level of effort to allocate to less critical result areas.

In this case, an interpretation of the allocation of focus and attention provides this direction to the team. Seeking out and winning key strategic marketing partners takes a back seat when the team is struggling with revenue goals – unless a new partnership could result in meeting or exceeding revenue goals. 

Once this deeper strategic thinking discussion of roles and priorities occurs within a team, update your KPIs with more strategic metrics that would ensure success on current priorities and progress on future goals.

role clarity exercise

Post Tags: Strategic Management

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