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SBP018: How to Choose Key Performance Indicators (KPIs)

Roger Knocker • January 18, 2024

SBP018: How to Choose Key Performance Indicators (KPIs)

The most common question I get is, ” How do I choose the right KPIs?”


Great question!


There are millions of things that could be measured. You can only manage what you measure.


So if you measure the wrong things you will manage the wrong things and not get the results you’re looking for. (Of course you could be lucky and get the required result, but why leave this to chance?)


So, how do I choose the right KPIs?

Well, you need to look at the Goal you’re trying to achieve and then select a KPI which is a good proxy of that goal.


If my goal is “Grow Revenue”, then “% Revenue Growth” would be a good proxy. An increase in % Revenue Growth would mean that I reach my goal.


That’s an easy example!


What if my goal is to “improve Customer Satisfaction”? Now this poses an interesting challenge as there could be a number of ways to measure this:

  • % Satisfied customers – as collected from a Customer Survey
  • % Net Promoter Score – also from a survey
  • % of Repeat customers – This is a proxy that assumes returning customers are satisfied
  • % Proposals Accepted – This could be a good proxy for Price
  • % On-Time Delivery – Another proxy, assuming the customer satisfaction is a natural result of on-time deliveries, however, there could
  • be other reasons why the customers are not satisfied even though the deliveries are on time.

 

The skill of selecting the right KPIs for the right situation is something that every leader needs to develop. This will take time but one thing you can do is get a list of KPIs that other organisations are using to help you on that journey.


Keep reading these tips because I will provide many tips for you to solve this problem. I can’t do it in one shot.


Tip 


Seek out a list of commonly used KPIs in your industry.

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