“What gets measured gets done” – Peter Drucker
This is a great quote for business or life, if you want to achieve your objectives or improve performance. As the saying goes “If you can’t measure it, you can’t manage it”.
In business this means all areas from people, processes to performance. However in business it is important to identify the main ‘things’ that will ensure your business’ success. These are often called Key Performance Indicators – KPIs for those that wish to use 3 letter acronyms. I shy away from using so called management jargon as it is often pretentious, arrogant and only serves to complicate simple processes, ideas and concepts.
The identification of KPIs that drive the success of your business should not exceed 3 to 5 measures or benchmarks otherwise it becomes too complicated and difficult to maintain. KPIs need to be SMART :
- SPECIFIC – must be clear and concise so that everybody understands it
- MEASURABLE – must be based on performance or behaviour that can be measured objectively
- ACHEIVABLE – must be attainable and what is required
- REALISTIC – must be a goal that can be realistically achieved and should represent significant progress from the status quo
- TIMELY – a goal must have time line to be achieved (e.g. by a certain date)
If we use a transport business for example, a KPI could be the number of kilometres travelled per truck per week to ensure an acceptable return on investment. It could look something like this :
By 30th June, the average kilometres travelled per week must be 8,000 kilometres per week. Currently the average is 5,000 kilometres per week.
- SPECIFIC – 8,000 kilometres per week
- MEASURABLE – kilometres per week is measurable objectively on a weekly basis
- ACHEIVABLE – 8,000 kilometres per week is achievable if the truck works 2 shifts per day and/or 6 days per week
- REALISTIC – it is realistic and is greater than the status quo of 5,000 kilometres per week
- TIMELY – must be achieved by 30th June
By implementing this KPI, performance can be measured on a weekly basis and compared week by week. The weekly KPI can be used to implement a plan of action to achieve the required objectives.
In conclusion, using SMART indicators your business objectives can be achieved providing you act on the KPIs to ensure you meet the required objectives. With no objective measurement system in place and no management then the status quo will remain and more than likely performance will deteriorate. So determine the key drivers of your business, start measuring them so you can improve your business’ performance.