A Quick Guide To Adopting Metrics And KPIs For The First Time

Written by Aaron Spool, Managing Director

I serve on the board of a nonprofit that has been going through a positive evolution and transformation. I’d been working with the CEO on the strategy, and the subject of metrics and KPIs (key performance indicators) came up. He wanted to link each strategic goal to a metric/KPI and also build out a budget. I got excited since creating and tying metrics to actionable strategy is my day job. After the process, I thought it might make a great article. So if you are looking to adopt a more metrics-driven process, you hopefully find value in what I write below.

What are your goals?

It’s tough to measure anything without knowing what you are actually trying to do. I know it sounds trite, but mapping out exactly what you are trying to do and why is very important. There is a particular magic about writing down something that makes it more tangible. It also helps you flesh out the feasibility and gets rid of ambiguity. So for this step, write down the following:

1. What are you actually trying to accomplish?

2. Why are you trying to accomplish this?

That’s all you need to do for this step. It’s also the hardest step. Defining something isn’t easy. You’ll need to be specific, so you don’t have major questions afterward. Clarifying queries are good, but the writeup needs to be definitive enough that everyone is clear as to the goal. This will save a lot of time, conflict and misapplied effort later. Also, this is a great place to get alignment from your team. Do you all agree this is what you are trying to do and why you are trying to do it?

What does success look like?

Once you get alignment and clarity, the next question to answer is what does success look like? Don’t confuse this with a measurement yet. That’s a different step. Right now, you just write down the answer to the following: What would it take for you to say you achieved your goal?

This works even if you have a broad-based goal. Let’s say it’s to eradicate homelessness. That’s a noble and large endeavor. It might even be considered a mission versus a tangible goal. Defining success in this instance is saying what eradicating homelessness looks like. What do you actually mean by that? It’s nuanced, but you’ll see if you have defined success when we get to the next step: measurement.

How do you measure success?

Once you have defined what success looks like, to measure success, you need to ask: How will I know if I achieved my goal? What will tell me that? Here are a few things to keep in mind:

1. Data availability. Can you easily get the data to give a timely measurement?

2. Causation. Is what you are measuring directly tied to the causation of success? In other words, does what you measure matter?

If the data is hard to get and the causation is tenuous, you are probably better served by narrowing the goal to make it more tangible. This can cause a lot of pain, especially if your organization is used to a particular way of operating. You might have longstanding traditions and projects and operations that are important to your team. Lots of time, effort and emotion invested. But ask yourself the difficult question: Can I prove any of this works? What tangible result do you have that the things you do are helping with your goals? I don’t recommend throwing longstanding operations out the window; just be curious and willing to ask the question. As your organization gets more into the metrics mindset, you’ll be better equipped to answer these questions and evolve your operation accordingly.

What should you measure against?

Once you have a measure you are confident in, the next step is to measure it against something. For first-time metrics, take a look at current performance. If this is typical performance, and you are happy with that, then what is “good” is meeting that performance. What is “great” is something better. How big the leap to “great” is will be up to you. It could be 10% higher, 25%, etc. You also might decide you want to push your team by making the “good” performance higher than the current performance.

An added bonus is to ask yourself: What could I do if I had more funding/resources? A metrics-driven resource pitch can go a long way with management and investors. If you say your current performance is X, but you can do X + Y with an investment of $Z, it’s a lot easier to get that funding versus just asking for more money for a hopeful outcome.

Consistently recalibrate.

No measure is perfect. What happens if you hit your measurement goals, but the overall success hasn’t been achieved? At first blush, it looks like you might have an imperfect measure, one that doesn’t reflect success. This is very common. Even good measures can be better, and if there is a big industry shift, what reflected success might not in the future. All measures require recalibration, and with the framework laid out in this article, you have a good start in finding the metrics and KPIs that best reflect the success of your goals.

This article was first published on Forbes Finance Council.

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