Attack The Day

Connecting People To Strategy To Results

By

The Three Categories of KPIs that Drive Growth

KPIs drive success when they follow The 3 rules that make KPIs work. These are: that they pose good questions, drive robust conversation and demand affirmative actions. I know a business has a strong KPI structure when these questions and conversations take place in open discussions about performance improvement, and when they are a part of everyday life.

In Practical Performance Measurement, Stacey Barr writes,

“What we really want is for performance measurement to be seen as a natural and essential part of work. We want people to associate it with learning more about what works and what doesn’t, with valuable feedback that keeps us on the right track and with continuous improvement of business success.”

I couldn’t agree more with Stacey on this and I firmly believe that identifying metrics in the categories I outline in this article is an essential part of driving that behaviour.

To use metrics best, it’s important to understand that they all fall into three fundamental categories. The categories are outcome, activity and effectiveness. I’m going to explore each of these types and explain the importance of representing them all in your KPI structure so that they drive execution in you business.

 

Outcome Metrics
There has been a lot written about how “lag metrics,” which measure something that happened in the past, such as last month’s revenue, are not KPIs, Some experts such as David Parmenter state that, “If a number has a currency sign in front of it it can’t be a KPI.” They feel that measuring something that has already happened does not help us change the future.

While, I understand the rationale behind this, I disagree. While the “lead measures” that drive results are your true KPIs, it is equally important to review the results of your efforts in context. As such the lag measures that tell us if we have been successful are an essential part of your KPI structure.

Photo by rawpixel on Unsplash

I refer to results metrics as Outcome measures. Outcome metrics are often Numeric Targets that are set as part of your strategic planning. These high level numbers are sometimes referred to as “desert island numbers,” as they are the key metrics that would tell you that everything was on track if you were away from the business on a tropical island for a period of time. You should be reviewing your Numeric Targets and organisation level Key Performance Indicators as part of your Quarterly Strategic Planning sessions with your leadership team and cascading these to your operational teams. Connecting these metrics to how individuals contribute to success is essential to executing on your strategy.

It is important to recognise that not all Outcome metrics are driven from Strategic Numeric targets. Some are about improving business as usual and these are equally important in driving a culture of taking action to improve our current business model. When the Activity and Effectiveness metrics that are assigned to individuals tell them how they are directly contributing to the successful outcomes for the business, it gives them context for why their efforts matter.

Activity Metrics

Photo by Braden Collum on Unsplash

In order to drive the results you desire it is important to understand and focus on the key things that will influence them.

Activity metrics are something that when done, influence a result later on. It is easy to assume that they are always something we want to do more of but this would be a mistake. While most activity KPIs would be “Maximise metrics”, or ones that you’d like to see increase, this is not universally the case. There are plenty of activities that we want to reduce in our business and track as “Minimise metrics.”

Deciding what activity metrics to track involves reviewing your processes to identify those few critical things that are the true indicators of future success.

For example, we might say a sales team will hit it’s revenue targets if it makes more phone calls and arranges more appointments. And while it might, what tells us if those calls were successful or the appointments are with the right people? There is usually a next step in the process and whether that is quotes sent, demonstrations given, or trials approved, there are likely to be activity metrics that tell us we are moving through the process, talking with the right people and engaging our target market.

Keep asking yourself whether something is an indication of moving towards our goal and you’ll find the key drivers of success that you can influence and improve.

One tactic that I use to identify the true activities that set us up for success is to ask “What next?” Starting with the most obvious step in a process ask, “What next?” and keep asking this, working through the implications and importance of each step in the process. You’ll often have a blinding flash of an insight that one particular step, if measured and discussed regularly, will really tell us if we are doing the right things to drive our critical results.

Effectiveness Metrics

Photo by Fleur Treurniet on Unsplash

Frequently measured as percentages, your effectiveness measures are process improvement opportunities. They are about the quality of what we do and they are an essential component of any KPI structure.

Given the choice of doing more of something or doing something better, our natural tendency is to opt for the former. It is far easier and more appealing to make more calls rather than do the hard yards of working out how to make them better.

Improving effectiveness takes vulnerability, practice and discipline. It is harder. Therefore it absolutely vital that any Activity metric has a quality measure to partner it. Holding people accountable for doing more without holding them accountable for doing it better is a recipe for mediocrity and a dangerous dark side of KPIs. As a manager, it is harder to coach people to improve what they do than to encourage them to make more effort, but being able to do so is an essential leadership skill. For example, in sales, improving conversion rate or average sales value are examples of effectiveness measures. For Operations, an example would be delivery on time, in full (DIFOT %).

Tracking Effectiveness metrics to ensure that we are improving makes us better employees and better managers. They are the most important Key Performance indicators for driving success.

Impact Of The Structure

As leaders and managers, our role is to guide decision making. If our KPI structure doesn’t provide a focus for enabling and making better decisions then we are just reporting without adding value. By making sure everybody understands the key activities that they can undertake that have the best chance of improving the outcomes we are tracking, then the structure is working.

In Transforming Performance Measurement, Dean Spitzer quotes Michael Hammer describing how this can go wrong. “The Measurement System did not connect the numbers to each other in a meaningful way or provide executives with any guidance as to how to improve them” Spitzer concludes that “As a result, managers had no idea how they could affect any of the measures. And so the measurement system reverted to being just a reporting system instead of a decision-guiding system.

This captures the essence of a good KPI structure perfectly. When you connect your activities and effectiveness to the outcomes they deliver. you set your structure up to be a decision guiding system, not a mere reporting system.

Follow and Connect with Andrew Ritchie on LinkedIn

By

Understanding the Context of Your Strategic Decisions

 

I have been in the privileged position of working with the Leadership Teams of many businesses to review their Strategic Plans, and in so doing, I’ve had the opportunity to help them set up, tweak and improve those plans. As the facilitator of those reviews, one of the main things I bring to the table is to ensure that the discussion and debate uses the correct context to drive decisions.

To create a powerful strategic plan, you need to make decisions in a specific order, because each decision you make sets up the context for the next decision. As you review each element of your strategy, you must do it with this context in mind.


When conducting Quarterly Strategic Reviews, Stephen Lynch, President of RESULTS, uses the picture above to explain the lens through which you review your SWOT analysis but I think it relates to your whole strategic plan.

Each person can only see part of the picture because they are looking through a narrow frame of reference. They each have a crucial part of the context, but not all of it. You have to take a step back in order to see the whole elephant and understand the bigger picture.

That’s why you need to make strategic planning decisions in order. We structure the RESULTS’ One-Page Strategic Plan in a specific order so that the whole picture is unveiled in a way that lets you produce your best work.

For example, it is important to have created your vision for the future before starting to decide on your strategic projects. Likewise, you can’t decide what your tactics for execution will be, or what your measurements of success are going to be, without first deciding what they are intended to accomplish.

It makes perfect sense that you can’t decide on what your 3 – 5 year strategic moves should be if you haven’t determined your ultimate long term goal.

The importance of ensuring that you have the right knowledge in the bank when making each subsequent decision is the rationale behind the order in which we approach our strategic planning in the order below:


Flipping The Plan

When helping businesses develop their strategy, a technique I use to create a solid thought process for making and reviewing decisions is to flip the plan upside down.

Firstly, when introducing an organisation to strategic planning for the first time it helps them to understand why it is important to follow a specific order and resist temptation to jump around. So let’s start flipping the plan.

Metrics or Key Performance Indicators (KPIs) come last. Why would we choose our KPIs last? KPIs are the metrics that, as individuals, we are accountable for moving forward and hitting targets for as an important part of our role. We will have chosen three categories of metrics: activity, effectiveness and outcome measures that let us know that we are being successful through what we do, how we are improving and what we deliver.

In other words, we need context. We can only know what we should be doing more of, what we should be doing better, and the results we should be delivering when the organisation knows the numeric targets that determine its success on a higher level.

The context of strategic decision making is very powerful when selecting your key strategic projects for the quarter and, as you’d expect, we recommend that you use your SWOT analysis as your context. I’d go as far as to say that a project can not be a strategic unless it directly impacts something in your SWOT analysis:Something can only be a strength if it is going to help us make the moves that will get us where we want to go

  • Something can only be a weakness if, unless we fix it, it is going to prevent us from making the moves that will get us where we want to go.
    Something can only be a opportunity if we need to pursue it to make a move that will get us where we want to go.
    Something can only be a threat if it can derail our plans to make a move that will get us where we want to go.
    One of the tasks that we conduct after we’ve chosen our three quarterly strategic projects is to allocate each one of them a colour. We then go through our SWOT and next to each element we place a coloured mark showing that the project has an impact on that aspect of the SWOT analysis. The more brightly coloured our SWOT, the more effective our projects should be. It is a powerful and enlightening exercise.

Of course, we have to put the SWOT analysis itself into context. We can only choose the elements of our SWOT analysis when we’ve chosen our three to five year strategic moves.

All the elements of your strategic plan cascade in this way. Each part should be discussed and debated in the light of previous decisions. So, before starting to create any element of your strategy ask yourself if you’ve got the context you need to make the right decisions.

 

Read more articles on Strategy, Culture and Key Performance Indicators here.

By

The Power of Finding Your Core Purpose

To really get the best out of your people and be the best organisation you can be, you need to give your people a compelling reason to work for you, beyond simply earning money.

Your core purpose is not about what you do or how you do it, your core purpose is why you choose to be part of this business and it defines the difference you want to make in the world. Together with your Big Hairy Audacious GoalTM and Core Values your Core Purpose forms the long term vision that you have for your organisation.


Studies show that employees who are aligned to your core purpose are three times more likely to stay with you and they report higher job satisfaction.

With many organisations the founder’s story contains the essence of the core purpose that remains with an organisation throughout it’s life. Here’s a classic: Yvon Chouinard started Patagonia to make climbing equipment that was more protective of the mountains he loved to climb. By replacing pitons, the metal spikes that were damaging rock walls, climbers were able to leave less destruction of the environment they loved.

“The pitons caused permanent damage to the rockwall,” Yvon explained, “For climbers, it was like religion — like they were messing up their own church.”

Patagonia’s new style equipment protected the rock and increased sales. The big ‘a-ha’ was that you could do something good for the environment that was also good for your business. That was a seminal lesson for Yvon. Patagonia’s Core Purpose became to make the best product, but do it with no unnecessary harm and to use business to positively respond to various environmental crisis.

Nowadays Patagonia uses 100% organic cotton in their garments and they have attracted some powerful PR with their Common Threads Initiative that you see here.


They want to encourage the repair, recycling and resale of their garments, they even took a full page advert in the New York Times with the tagline: don’t buy this jacket, unless you really need it. This environmental protection continues to align with their original reason for existing

The experience of Yvon Chouinard has driven “Why” Patagonia exists for six decades and it rings true in their mission statement below.

“Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”

I have seen the difference that can be made by aligning people to an organisation’s core purpose in hundreds of organisations that I’ve had the privilege of working with. But I recently had an experience that made me think about core purpose even more deeply.

This week I happened to be in my home town of Cirencester in the UK visiting family. I don’t get back that often these days and it is always good to make the effort to catch up with people that are part of my story.

I was walking past my old driving instructor’s house and as I thought of him, as I have many times over the years, he happened to be standing outside. So I crossed the road and waved.

“You look like a familiar face” he said.

“Hi, Lawrence, I’m Andrew, you taught me to drive in 1990, I just wanted to say thank you. Thank you for helping me be a half decent driver.”

As he broke into a huge smile I knew that it really meant something to him. We shot the breeze for twenty minutes, sharing stories about life, largely driving related. Lawrence is nearly 80 now and hasn’t taught as an instructor for a number of years but remains active in speed safety and defensive driving organisations. It was a privilege to talk with him and hear his genuine passion for keeping young people safe, to help them make good decisions in life.

As Lawrence talked he told me his greatest pride was in teaching youngsters who had been in trouble with the law, drugs or were otherwise in danger of going down the wrong path and in knowing that he’d helped some get back on the right track. He’d given people a skill that might create opportunities they would have missed out on. He was able to see his students growing as people during their training. This was his greatest sense of achievement.

I couldn’t have guessed that a simple “thank you” would mean so much, but I could tell Lawrence was deeply touched by the way I took the time to offer it to him . He enquired of my driving record and what I remembered of our lessons and his teaching. I’m glad I took the time simply to enjoy Lawrence’s company, to listen to his story and to share mine.

Of course, while chatting with him I didn’t go into business mode ‘examining’ his core purpose. It was only on reflection that I realised that our exchange had something more to teach.I realised that having a core purpose, a reason for getting up everyday, isn’t simply something that makes a difference to how we work, where we work and why we choose to do what we do for a living.

It is much deeper. It’s the need for a purpose in life, the need for something meaningful to drive us on. It is a deep part of who we are. I now know that keeping youngsters safe isn’t just a part of what made Lawrence a great driving instructor. It is what makes him a great person.

Whether it is a passion, a purpose or a calling, see it in others as well as yourself. Understand what drives others to be the best they can be. And if they touch your life through it, say thank you. I’m currently reading A Tribe Of Mentors by Tim Ferris, he quotes Esther Perel:“Always take the time to acknowledge people – and not just when you know when you have something to gain. If you show interest in them, they will show interest in you. People react to kindness, to respect with respect.”

A little recognition can make a big difference to lives of others. To be sure, it will mean a lot to them. I’ll be sure to recognise it next time I hear someone expressing a true passion for why they choose their path in life. Not only is it a better way to be, it’s better business, too.