Maximising Strategic Impact with Key Performance Indicators: A Guide

Key Performance Indicators (KPIs) are measurable indicators that you use to track the progress of your strategy and they achievement of your strategic goals and objectives.

They tell you whether your strategy is working as intended or not.

Goals, Objectives and KPIs

In StratNavApp.com, we use the Balanced Scorecard methodology to break strategic missions and/or visions down into long-term Strategic Goals and from their into medium-term Strategic Objectives. We then use KPIs to track progress towards achieving those objectives.

For example, at StratNavApp.com we have a goal to help more people to develop and execute better strategies. We break this down into an objective to sign more users up to the platform. And we track this with a KPI by measuring the number of new people who sign up to the platform each month. We summarise all of this, with a range of other goals, objectives and KPIS on our Strategy Scorecard which we monitor on a regular basis.

Defining a Performance Indicator

For each KPI we can define:

• Measurement Dimension: a brief description of the KPI. For example "New users who sign up each month".
  
  
• Value Chain Stage: this can be:
  
  • Outcome: an impact on the business or its market
  • Output Processing: a rate of producing output, such as average time to manufacture a unit.
  • Output: a rate of output, such as number of units manufactured.
  • Input Processing: a rate of acquiring inputs, such as average order delivery time.
  • Input: a rate of consumption of inputs, such as litres of paint or hours of labour consumed.
• Indicator Type: this can be:
  • Quantitative: a measure that can be expressed in numbers.
  • Qualititative: a measure that is expressed in words - such as high, medium or low.
    NB: Quantitative measures usually contain more information and are more objective than qualitative measures. At StratNavApp.com, we have a strong preference for quantitative measures.
• Unit of measurement: what is being measured or counted. This could be a unit of currency, or something like 'users' or 'completed units'.
  
  
• Description: A more detailed description of the measure. This often includes how the measurement is recorded, and definitions or calculations required, as well as what does and does not count for measurement purposes. (Think about the definitions of terms in account-based measures, like "risk-adjusted return on profit", but also more practical things like whether 'units manufactured' includes or excludes defective units.) Whilst such definitions may seem obvious to some people, they aren't always obvious to people from different backgrounds.
  
  
• Stock or Flow:
  • A Stock is a measure at a point in time, such as units in stock, or the balance in a bank account.
  • A Flow is a measure of movement between two dates, such as sales, revenues, or units manufactured.
    Stocks and flows often work together. For example: opening balanced (stock) + income (flow) - expenses (flow) = closing balance (stock). Even in a simple example like this, it is important to be clear about which of these measure are most relevant to your strategic objective as you probably don't need to track them all.
• Frequence: How often you will record the metric.
  • This could be bienually (every two years), annually, half yearly (biannually), quarterly, monthly, fortnightly (every two weeks), weekly or daily.
  • Generally, more often is better than less often, but there is a point where the value of more frequent measurements is less than the cost.
  • StratNavApp.com will remind you each time a new measurement is due for each of your KPIs.
  • StratNavApp.com also supports automating the collection process to make it easier to take measurements more often, using APIs, or tools like Zapier.

Scorecard Display Options

You can configure how each of your KPIs is displayed on your Strategic Scorecard.

• Three Significant Digits: Does your strategic scorecard really need to show your last month's sales figures in all 8 digits of detail? Sometimes the detail gets in the way, stopping you seeing the wood for the trees. Opting for three significant digits means £1,234,567.89 will be shown as a more natural £1.23m.
• Invert Y Axis: Sometimes less is more. For example, fewer complaints at better than more complaints. By inverting the axis on your KPI charts, improvements are always reflected as charts moving from bottom left to top right.
• Chart Delta: Particularly when dealing with big numbers for Stock measurements, it makes more sense to chart the change in the value rather than the absolute value itself. Simply tick this box and StratNavApp.com will take care of that for you.

Targets and Measurements

For each KPI you can record a number of targets and, of course, a number of results. Targets represent how you hope(d) or anticipate(d) the business will perform. Results are the measurements which show how it actually performed.

For each, you can record:

• The date or time period for the measurement.
  • For stock measurements it's a single date - a point in time.
  • For flow measurements it's a start and end date - a period of time.
• The value: the amount expressed in the units of measurement.
• Commentary: an optional commentary about the target or result.

Linking to other elements in your strategy

You can link KPIs to:

• Objectives: You will usually create a KPI from an objective, so the link will already be in place. But you can also then link the KPI to a different Objective if you need to.
• Actions: You can attach actions (with stakeholders and due dates, etc.) to KPIs.

KPIs versus OKRs

OKRs (Objectives & Key Results) are a management technique built around KPIs linked to Objectives. The idea was developed by Andy Grove in the 1970s, as an extension of MBO (Management By Objectives).

That relationship between KPIs and Objectives is built into StratNavApp.Com. In fact, StratNavApp.com goes well beyond that by embedding your OKRs into your strategy. We don't call them OKRs, but you can, if you prefer. They're the same thing.