I don’t like to run for information. Instead, I prefer to act based on key performance indicators (KPIs). Because of this, I invest in having valuable information in a timely manner, most often in real or near-real-time.
To better understand KPIs and how they make my life easier and the company I lead more dynamic, it’s important to note that as a service company, my team tracks time daily; reconciles credit cards and bank statements daily; manages payroll for five legal entities and more than 100 employees in less than half a day; ensures supplier invoices are approved in time and by the right person to make a well-prepared weekly cheque run, and color codes almost everything.
This pacing is so important because we don’t make decisions only when a month has closed; we make decisions in real-time as opportunities and challenges arise. This is only possible, however, when we have KPIs that can show how we’re doing, where trends are going, and how we can course correct, when needed, in a timely manner.
Understanding the Value of Indicators
Robust and powerful KPIs can be used to help make decisions in real time. For example, if our credit cards were only reconciled monthly instead of daily, it would be hard for me to have a real view of our cash flow. This, in turn, would make it a challenge to tell the rest of the leadership team whether we have the budget to spend on a new lead-generation program or if we should hire someone new for the delivery team.
KPIs start to have some weight when you bring them back to basics: key performance indicators. “Indicator” means that the information you have at hand isn’t final or full but can help inform efficient decision-making. I’ve found KPIs can also help course-correct because they give a glimpse into the future. To assume you need all the information to make a decision is to assume life is perfect, and as everyone knows, it isn’t. Life and decisions are colorful, changing, and challenging. It’s what we, as business operators, do with the information that matters.
Just as I aim to surround myself with smart, intelligent people, I also aim to surround myself with smart, simple KPIs because I can’t wait for the conclusion before running the business. If I did, we would all be in limbo. When in doubt, I take the KPI as factual (within reason), and more often than not, it all works out for the best. I believe that even with actual data, we wouldn’t significantly improve our decision-making success rate because often when things don’t go as planned, it’s because it was out of our control or a change came up along the way. But, being well-versed in making decisions makes adapting along the way easier.
Setting Effective KPIs
In 2021 — when people talk about the Internet of Things, big data, artificial intelligence and more — I’m finding that it’s easy to get bogged down by the newest, shiniest way of working. But it’s important to make sure you have a good hold on your KPIs so you’re focusing your efforts in the right places. You’re better off with one or two key KPIs that are accurate and clear than getting lost in too much complexity. When setting KPIs, think of the things you have to ask your team about the most. In a meeting, what’s the key topic that you often have to waste time collecting information on (rather than answer)? This should be your first KPI.
Your KPI Responsibility
“Garbage in; garbage out,” is a mantra at my office. We know that if we configure a system with old, bad data, then what we’ll get is expensive, old, bad data. As a leader and owner of your KPIs, your responsibility is to use them and check that the information is accurate. There’s nothing worse than making a decision based on information you thought was accurate only to find out the system was pulling data differently than you realized.
You must, with your own two eyes, deep dive into a KPI to ensure its accuracy. Every month or so, I pick one to look into more thoroughly to ensure we don’t lose track. Additionally, if we make a significant change in the organization’s structure or business offering, we do a full audit of our KPIs to ensure their accuracy.
The bottom line is this: I believe you’re better off with a few solid KPIs to help you make decisions than wasting time, energy and creating stress for your team.
Read this article on Forbes here.
