Key Performance Indicators (KPI) are data sets that you watch to gain an understanding of the health of your business.
Business health, however, is defined by the direction you want the business to travel. If you want to grow the business 30%, then growth KPIs need to be aligned with forwarding the vision of achieving 30% growth. If you want to sell the business, then KPIs need to be aligned with getting the business ready for sale.
You get the point. Establishing KPIs apart from the vision you have for the company is pointless. To that end, here are a few steps to establishing the best KPIs:
- Understand your vision. Where do you want the company to go?
- Create a 12-quarter plan of milestones that need to be achieved for the company to achieve the vision you have for it.
- From the milestone list you just created, chose the high-level success factors that must be achieved for those milestones to be met. These are your KPIs.
- Place your KPIs into the Seven Business Drivers. You need at least one KPI per driver. If a driver is empty, create a KPI for it.
- Measure your progress toward achieving the KPI.
These easy five steps will help you create KPIs that are both meaningful to your company and powerful enough to help you make the right decisions.
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