Maximising Strategic Impact with KPIs: A Guide

Key Performance Indicators (KPIs) are measurable indicators that you use to track the progress of your strategy and the 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: The longer-term impacts or changes resulting from the outputs. Outcomes are the effects on the target audience or the broader community. Example performance indicators include:
    • Customer satisfaction
    • Market share growth
    • Problems resolved
  • Output Processing: The activities or operations that transform inputs into outputs. This stage focuses on the efficiency and effectiveness of the processes. Example performance indicators include:
    • Average time to manufacture a unit.
    • Error rates.
    • Resource utilisation.
  • Output: The direct products or services resulting from the processes. Outputs are the immediate results of the activities undertaken. Example performance indicators include:
    • Number of units produced
    • Quality of products/services
    • Delivery times
  • Input Processing: The activities or operations for acquiring and managing. This stage focuses on the efficiency and effectiveness of the processes. Example performance indicators include
    • Average order delivery time.
    • Average stock levels.
  • Input: Resources that are put into the system to achieve the strategic goals. These can include financial resources, human resources, materials, information, and technology. Example performance indicators include:
    • Budget allocated
    • Number of staff hours
    • Quantity of raw materials
• 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 measures 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.

Commentary:

This should reflect:

• What happened? (the variance)
• So what? (the impact)
• Now what? (the action / decision)

Matching time periods between Targets and Measurements

When capturing targets and measurements, it's important that they're captured on a like-for-like basis.

This is particularly true for flow measurements, where problems most easily arise.

For example: if your target is to achieve £12m revenue for the year, but you track actual revenue measurements on a monthly basis, then it is important to convert your annual revenue target to a monthly basis.

• You could do that by simply dividing the annual target by 12, giving a target of £1m a month.
• However, in a more seasonal business (like ice-cream sales), you might want to allocate a higher target to some months than to others.
• Lastly, it may not be necessary to explicitly set a target for each individual month of the year. You could, for example, set a target for the last month of the year only - but it would still be only the £1m for that month, rather than the £12m for the whole year.

RAG-rating your KPIs

Once you've captured some actual performance measurements for your KPI, you can RAG-rate it: that is, rate it Red, Amber or Green.

Simple guidelines for RAG-rating KPIs (traffic lights)

Before you start, be explicit about:

• Direction of travel (higher is better vs lower is better). If “lower is better” (e.g., complaints), consider inverting the KPI’s axis so “up and to the right” still means improvement.
• Time period match between targets and actuals (monthly vs quarterly vs annual). If they don’t match, convert targets so you’re comparing like-for-like.

1) Use a simple rule based on variance to target

Define variance as a percentage:

• If higher is better:
  Variance % = (Actual − Target) / Target
• If lower is better:
  Variance % = (Target − Actual) / Target

Then apply thresholds:

• Green (On track / achieved)
  • Actual is at or better than target, or within an agreed tolerance (e.g. no more than 5% off target)
• Amber (At risk)
  • Actual is slipping and 5–10% off target, or trend suggests you’ll miss the next target unless you intervene
• Red (Off track)
  • Actual is >10% off target, or clearly unlikely to hit the next target without a major change

(Adjust the 5% / 10% thresholds to fit the KPI’s volatility and importance.)

2) Add a simple “trend override” (because direction matters)

Use the latest 2–3 data points:

• If a KPI is currently Green but the trend is deteriorating fast, downgrade one level (Green → Amber).
• If a KPI is Amber and the trend is improving strongly, upgrade one level (Amber → Green) only if the improvement is sustained (e.g., at least 2 consecutive periods).

4) Use different thresholds for “leading” vs “lagging” indicators

• Leading indicators (early signals): use tighter Amber thresholds (because you want early warning).
• Lagging indicators (outcomes): allow a little more tolerance, but be stricter on sustained underperformance.

5) Keep it auditable with a one-line commentary

Each actual measurement has space for a commentary (see above). Ensure your RAG ratings and commentary are consistent.

Linking KPIs to stakeholders

You can link stakeholders (people) to your KPIs and define their roles using the RASCI framework. Some examples:

• Responsible: who is responsible for updating the KPI, or for providing the data to update it.
• Accountable: who is accountable for the performance of the KPI (for example, if targets are not met).

Linking to other elements in your strategy

You can also 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.

Where to find KPIs in StratNavApp

To find your KPIs:

1. Sign in to StratNavApp.com.
2. Select the project you want to work with.
3. Either:
   1. Create or select a goal in the Direction section of the app.
   2. Create or select an objective linked to that goal.
   3. Create or select a KPI linked to that objective
      OR
   4. Click on Results on the main menu.
   5. Select a KPI on the Scorecard.

See also:

• Unlock the power of OKRs with StratNavApp.com
• Video Introducation Course: Chapter 9: Objectives and KPIs