KPIs (Key Performance Indicators) and Strategic Planning & Management:

 

KPIs (Key Performance Indicators) and Strategic Planning & Management:

The setting of Key Performance Indicators (abbreviated as KPIs) is an important feature of the strategic planning process and plays a key role in the measurement of the progress of the organization towards the attainment of its planned goals. This measurement of progress is an essential feature of the strategic plan implementation (i.e. plans are one thing, but making things happen is quite another). Organisation management must periodically assess progress and take corrective action if progress is not being achieved. Without a periodic assessment of progress, strategic plans are likely to fail.

The terms "Performance Measures" and "Performance Indicators" mean the same and the use of the word "Key" as in Key Performance Indicators merely mean the Performance Measures that are deemed to be most important.

Example of a key performance indicator

As a typical example, organizations in education very often have a goal to reach a certain number of students. For example, a school chain might have a goal to reach 100000 students within 5 years. In such a case, it is important to periodically measure the total number of students and to determine whether progress is being made.

The Key Performance Indicator for this goal is the number of students, and it is relatively easy to measure. For each of the 5 years of the strategic plan, a target can be set and this target is the Key Performance Indicator for that goal.

However, not all goals contained within the strategic plan will have obvious key performance indicators. The following table provides examples of key performance indicators for difficult-to-measure objectives.

Objective	Possible Key Performance Indicator (KPI)
Increase the quality of programs	Attainment of results (e.g. desired placing in a national competition) The number of reported issues (is there a reduction?) The number of complaints (is there a reduction?)
Improve facilities to a national standard	Construction / re-development of a facility suitable for students Certification (as a national standard facility)
Increase in revenue	Total revenue reaches $50,000

It is important to consider that key performance indicators will be reported to stakeholders. They provide "essential-to-know" information.

Key performance indicators should be clear-cut, that is they are either achieved or not achieved. Using key performance indicators, the management process will compare what was desired with what happened.

Success Measures Plan (Key Performance Indicators-KPIs)

 

All these actions and activities will be worthless if you don’t know how to measure the good you’re doing by undertaking them.  In this section, capture how you will manage programs and monitor your success.  What will tell you that the things you’re doing are working to bring your message to the world and helping you achieve your Vision and Mission?  Focus these on what you’ll look for THIS YEAR. 

 

Measures of Success: (KPIs)	When this will be measured: (Try to have measures throughout the year)

 

Examples of Sales KPIs

1. Number of New Contracts Signed Per Period
2. Dollar Value for New Contracts Signed Per Period
3. Number of Engaged Qualified Leads in Sales Funnel
4. Hours of Resources Spent on Sales Follow Up
5. Average Time for Conversion
6. Net Sales – Dollar or Percentage Growth

Examples of Financial KPIs

7. Growth in Revenue
8. Net Profit Margin
9. Gross Profit Margin
10. Operational Cash Flow
11. Current Accounts Receivables
12. Inventory Turnover
13. Savings

Examples of Customer KPIs

14. Number of Customers Retained
15. Percentage of Market Share
16. Net Promoter Score
17. Average Ticket/Support Resolution Time

Examples of Operational KPIs

18. Order Fulfillment Time
19. Time to Market
20. Employee Satisfaction Rating
21. Employee Churn Rate

Examples of Marketing KPIs

22. Monthly Website Traffic
23. Number of Qualified Leads
24. Conversion Rate for Call-To-Action Content
25. Keywords in Top 10 Search Engine Results
26. Blog Articles Published This Month
27. E-Books Published This Month

Five common mistakes in using KPIs

1. KPIs are not aligned with strategic objectives

2. Selection of KPIs is limited to those easily measurable

3. Selection of KPIs gives too much weight to the past

4. KPIs are used as instruments for controlling employees

5. No the distinction between strategic and operational KPIs

 

Three recommendations for using KPIs

Based on the insights above, I would like to give three recommendations for getting the best out of KPIs.

1. Closely align strategic KPIs with strategic objectives.

Keep strategic KPIs relevant to your strategy implementation and your regular strategy review, by making sure, they are relevant and closely linked to a specific strategic objective.

2. Integrate KPIs in a strategic management framework.

You can increase the effectiveness of KPIs by integrating them in a strategic management framework. One of the most popular frameworks is Balanced Scorecard. Despite some challenges in its practical implementation, I would still recommend to use it.

3. Apply stringent criteria for selecting your KPIs.

KPIs are like torchlights used to shine into different corners of your business. Due to limited resources, you cannot shine into every corner. Thus, you should make a stringent selection of KPIs based on criteria like a relevance to your strategic objectives, a balance between forward-looking and backwards-looking KPIs, and comprehensibility of KPIs.

Conclusion

KPIs can make the difference between successful strategy implementation and failure to detect and adapt to strategic challenges early enough. The key is to implement strategic and operational KPIs in the right way, which means that they should be aligned with the corporate strategy and relevant to the purpose.