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 and their budget, then 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 do 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.

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Role Clarity with Your Team

Start by focusing on the critical results for each functional area.

Review the company plan and identify the three to four essential result areas in which your team plays a unique or collaborative role.

Next, explore how to measure success in each critical result area.

This typically requires reviewing current KPIs and new ones drafted from the new strategic plan.

Then clarify the role your team plays in achieving those metrics.

Shared goals and metrics are typical in today's organizations. But not everyone has the same role even when they share a goal.  Outlining your team's role is a key clarity component. For example, your team may drive the plan to achieve a goal, or it may contribute in a specific way.  

Spell it out in this step and clarify the method used to drive performance of this role. For example, a team that drives performance will lead the planning and management effort, while someone who contributes will attend and participate in this process, but not drive it.

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 roadmaps, forecasting, or decision-making, to name a few.

Next, articulate specific priorities for the next review periods.

Teams have existing commitments, and often that means that new strategic priorities have to wait or existing priorities need renegotiation.   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 tie them together and make prioritization part of the role-clarity process.

This is the time to negotiate reducing focus on, or eliminating, a legacy commitment to make room for a new priority, or to delay a new priority until a current priority is complete.

Finally, discuss how you will allocate time and attention across all areas.

This is where a leader can tell if teams need more resources or direction on how to use their resources differently. KPIs rarely detail effort and attention on performance metrics. The Focused Momentum's Role Clarity process goes further, using time and attention to calibrate capacity and expectations. 

Using percentages, define how much time and attention towards each CRA.

Applying a % of time 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, interpreting how to allocate time and attention gives the team direction.

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 the team has a deeper strategic discussion about roles and priorities, update your KPIs with more strategic metrics that ensure success on current priorities and progress on future goals.

Focused Momentum's Role Clarity Process is just one way to support plan implementation.