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Key Performance Indicators are essential in managing any business. Not only do they define a picture of success but they are also intended to horizontally and vertically align people and functions to specific goals and create a sense of personal and shared accountability. At the end of the day, it is only what is measured and tracked that gets managed. However, despite the obvious necessity to leverage KPI’s as a tool to enable success, an extensive MIT Sloan Management Review survey indicates that only 27% of companies strongly influence process and people management through their KPIs. Additionally, many companies who are actively tracking organizational and functional performance against a set of KPIs are still limiting their performance measurements to traditional and retrospective hard factors like spend, revenues, and profits which offer little insight into how a business will likely perform in the future and do not align to company strategy or vision.
As early as 1992, Robert Kaplan and David Norton introduced the Balanced Scorecard Framework which utilizes strategy mapping to better align KPIs to strategic objectives and to go beyond outcome-tracking by incorporating critical performance enablers like customer satisfaction, internal efficiencies, talent development and culture into the KPI mix. Despite the editors of Harvard Business Review considering it to be one of the most influential business ideas of the past 75 years, it is only a minority of companies that are fully leveraging scorecards to drive effective decision-making. Moreover, now that 27 years have passed since the Balanced Scorecard was initially introduced, new soft factors like agility, purpose and reputation have come to the fore and new intelligent reporting technology is allowing progressive data-driven companies to get a massive head-start on the rest of the field.
Agility Is Essential In A Fast-Evolving World
Aaron De Smet, leader of organization design at Mckinsey, defines agility as the ability of an organization to renew itself, adapt, change quickly and succeed in a rapidly changing, ambiguous, turbulent environment. Considering the pace of change that businesses are now experiencing — with accelerating technological innovation, intensifying competitive pressure and fast-evolving customer expectations — it has become increasingly important to be flexible and swift in terms of decision making. For that reason, consider appropriate agility measures like speed-to-market, decision-making time-frames etc. in your company scorecard.
Improving Agility With Technology
Swift and effective decision-making will require improved analysis and reporting tools that provide an ‘at a glance’ yet dynamic view on business health. Expect companies to start leveraging consolidated multi-variable reporting tools which include hard and soft KPIs, supported by AI and machine learning, to make informed business decisions. According to an MIT Sloan Management Review article Leading With Next Generation Key Performance Indicators, machine learning is “poised to radically influence how executives use KPIs to monitor and spur growth. As next-generation predictive algorithms are incorporated into business process planning and design, they seem destined to inspire next-generation digital dashboards. KPIs will consequently offer predictive and prescriptive indicators, not just rearview-mirror reviews. Data-driven companies that leverage these advances by reconceiving their KPIs will enjoy distinct competitive advantages. ”
Hold Your Organisation Accountable To Its Purpose
Our next generation consumers and employees are motivated and inspired by a very different set of principles and priorities. A purpose-driven culture is essential to attracting next-generation talent and to connect companies and brands more authentically with their target audience. It is becoming increasingly important for businesses to establish a greater level of affinity and emotional connection with their customers. Companies are encouraged to clearly articulate their purpose statement — a reason for being that supersedes sales and profit and identify practical and organizational measures to track their commitment to this purpose.
Other Soft Factors To Consider In Your KPI Reviews:
Corporate Culture: Consider using internal surveys to track culture scores and to gauge employee morale, loyalty and satisfaction.
Brand and Reputation: Consider appropriate measures to track perceptions of your business amongst your target consumers or potential employees.
Talent Management: Incorporate measures to assess company performance in attracting and retaining the right talent, and progress with training and development, diversity scores, etc.
Customer focus: Consider measures that can track product satisfaction and brand equity and understanding where customers are at in terms of brand loyalty and advocacy.
Take steps now to future-proof your business by aligning the focus areas of your functions and work-force to measurements that matter. This may require some introspection to really understand what success means for your company and what enables that success, but that is what winning companies do. Reap the benefits by demonstrating a real commitment to tracking your company’s performance against these soft and heard measures and embrace available technologies to support a more agile, data-driven approach to decision-making.
April 17, 2019 at 08:18AM
Forbes – Entrepreneurs