I have just finished a project with a client that shared more than 70 KPIs with employees.
While I admire the client’s attention to detail, her employees were overwhelmed with so much data that it resulted in analysis paralysis. After much “colorful” discussion, we reduced the KPIs to just two primary and ten secondaries.
Primary KPIs directly impact profitability and/or cash flow, while secondary relate more to efficiency. Examples include Accounts Receivable collections, the number of new clients in the month, order fulfillment, etc.
Having just started Q4 of the current calendar year, you are
likely already contemplating your budget for 2023. Given the high rate of inflation, supply chain issues, and human capital-related challenges, you would be wise to consider identifying KPIs that can be linked to driving profitability and, in some cases, cash flow.
REMEMBER THAT NOT EVERYTHING INTERESTING IS USEFUL
Here are four questions to contemplate when creating your KPIs and budget for next year
- Identify which KPIs link directly to profitability
- What are the constraints that might prevent your employees from meeting the KPIs? i.e., are your targets realistic?
- What employee behaviours can influence the KPIs
- How do they link to your incentive program