Leading a team or running a company isn’t always smooth. How do you know you are on course to achieving your set goals and objectives? This is where Key Performance Indicators (KPIs) come into play. KPIs aren’t spreadsheets or numbers; they are navigational tools that provide insights into your company’s performance.

However, the challenge lies in selecting the right KPIs that truly reflect your business priorities because most business leads have been bogged up and focused on minor things instead of focusing on relevant KPIs. For example, “tracking the number of social media posts rather than focusing on engagement or conversion rates, tracking metrics like website visits without considering how these visits contribute to actual business goals, or tracking employee attendance when the goal is to improve sales.”

If you must get quantifiable, valuable, and tangible data to propel your business forward, you must learn to focus and measure both financial and non-financial KPIs that align with your business goals, strategic priorities, and key drivers.

Here in this article, we will look at best practices on how to align KPIs to your business goals, strategic priorities, and business drivers and how best to track them to improve your business

Align KPIs to Business Goals & Strategic Priorities

To align KPIs to business goals and strategic priorities, you have to first identify your business goals and strategic priorities. Here are the steps involved:

Step 1: Define Clear Goals

Goals are the results you aim to achieve in the attainment of your broad business vision.  Clearly state them out. They might include:

• Growth: Increasing revenue, expanding market share, or acquiring new customers.
• Profitability: Enhancing profit margins, reducing costs, or improving operational efficiency.
• Customer Satisfaction: Boosting customer satisfaction scores, improving retention rates, or increasing Net Promoter Score (NPS).
• Market Expansion: Breaking into new geographical markets, targeting new customer segments, or expanding product lines.

Step 2: Determine Strategic Priorities

Business strategic priorities are vital high-level initiatives that a business focuses on to achieve its long-term goals. This step involves identifying and prioritizing the strategic initiatives that will help you achieve your business objectives. Examples include:

• Breaking into New Markets: Conducting market research, forming strategic partnerships, or launching marketing campaigns tailored to new regions.
• Developing New Products: Investing in research and development, adopting new technology, or incorporating customer feedback into product design.
• Enhancing Customer Experience: Implementing customer feedback systems, improving customer service personnel, or deploying new customer support technologies.

Step 3: Link KPIs

State a KPI that supports and reflects your specific business goals and priorities. Let’s look at some examples:

Goal: Increase market share.

• KPI: Market share percentage.
• Example: Quarterly tracking of the market share percentage to measure progress in increasing market share.

Goal: Improve net profit margins.

• KPI: Net profit margin percentage.
• Example: Monthly monitoring of net profit margin to ensure profitability improvements are on track.

Strategic Priority: Innovate and launch new products.

• KPI: Number of new products launched.
• Example: Aim to launch two new products in the next 12 months and track the number of products successfully brought to market.

Strategic Priority: Improve customer satisfaction

• KPI: Customer retention rate.
• Example: Measure the percentage of customers who continue to do business with you over a specific period and the number of new customers.

The table below gives you a summary of how to align your KPI to your business goals and strategic priorities:

 

Align The KPIs To Key Business Drivers

In addition to aligning the KPIs to your business goals and strategic priorities, you also need to align them with your key business drivers. What are key business drivers? These are important factors that directly influence your business’s performance and success. They can be both financial and non-financial.

Financial drivers include sales revenue, profit margins, cash flow, etc. and non-financial drivers include customer satisfaction, employee productivity, and brand awareness. Some of the examples of key business drivers you have to align KPIs to include:

• Sales Revenue: This is a primary driver for profitability and growth.
• Customer Satisfaction: This determines the customer retention rate and brand loyalty.
• Employee Productivity: Influences the degree of efficiency and operational success.
• Market Penetration: This determines the expansion of market share.
• Operational Efficiency: This affects service delivery and cost management.

Depending on the specifics of your business, key business drivers might differ. You have to first state your key business drivers, state out KPI for each of them, and state out ways to measure and track the KPI. For instance, if your business driver is “Sales revenue,” Your KPI will be “Monthly Sales Growth Rate.” The objective of the KPI is to increase market share. To track this specific KPI, you have to keep track of the percentage increase in your monthly sales.

The table below contains examples of how you can align KPIs to your business drivers and the ways you can track them.

 

Focus on Key Business Outcomes: Measure Performance, Not Activities

One of the major mistakes most people make when tracking KPIs is to focus on measuring the activities. In tracking KPIs, focus on business outcomes and measure performance, not the activities. By doing this, you get objective insight into your progress and the effectiveness of your strategies and efforts.

For instance, your focus area is “Sales Revenue.” An outcome-based KPI will be “Total Sales Revenue.” You are to measure the result of the sales efforts to get the actual revenue generated from sales, not the number of campaigns or sales advertisements.

The table below shows examples of key result areas, key performance outcomes, related activities, outcome-based KPIs, what to measure, and why they matter.

 

Final Words

Whether your goal is to grow revenue, improve profitability or enhance operational efficiency, MacAdebowale Professional Services (MAPS Advisory) provides the insights and tools you need to succeed.

Contact us today at emails@macadebowale.com and let us help you navigate the challenges of selecting the right KPIs to track to ensure your business stays on course and achieves its goals.