Measuring Success: How Winning Teams Craft KPIs to Drive Results

Summary

In this edition, we will be covering the following items:

1. Building KPIs for short-term goals & long-range plans

2. Building the right KPIs for your audience

3. Measuring inputs and tying them to outcomes

4. Using Power BI to create an integrated reporting suite

Working Backwards from Your Business Strategy

Great KPIs align with your company’s broader goals. To be successful, your FP&A team has to work closely with business leaders to understand their objectives and ensure that KPIs track progress against targets.

1. Working Backwards from Company Strategy: The first step in crafting effective KPIs is identifying your company’s top priorities. From a financial and operational perspective, what goals are important to senior leadership? How can you quantify those in terms that can be measured and analyzed?

2. Long-Range Plans and Short-Term Goals: Next, your team needs to break down your long-term objectives into short-term milestones that can be achieved along the way. Think about what quantifiable measures you could use as a foundation for action-oriented KPIs. How would these measurable short-term goals “ladder up” to.

Know Your Audience (Not All KPIs Are Created Equally)

You’ve done the hard work of thinking through your organization’s broader goals. Tailoring your KPIs to your audience is critical to ensuring they are actioned upon and they receive the attention they deserve. Before you conclude your KPI-selection process, take some time to think about your stakeholders and how to tailor your KPIs for maximum impact with the target audience and settings.

1. Matching KPIs to the Target Audience: Who are the key stakeholders who will be monitoring these KPIs? What other information is important to them? How can you make this information actionable to their teams, so they can drive results?

2. Matching KPIs to the Setting (Context): In what context will your stakeholders be consuming this information? How can we frame this information to drive urgency, but not “ruffle feathers?”

Focusing on Inputs (Leading Indicators)

A common mistake made in this process is focusing on lagging indicators. Lagging indicators (like revenue, profit) are the tail end of the cycle of action and results. Tracking these metrics doesn’t provide your team with a “feedback loop” with which to steer the business.

1. Input-Focused KPIs (Leading Indicators): Leading indicators are the “inputs” of the business. Instead of tracking sales (outcome), your team should focus on number of outreaches made, or a composite “sales pipeline health” metric.

2. Controllable and Actionable: Focusing on leading indicators gives your team with a set of tangible, concreate actions that they can focus on to move the needle. Unlike lagging indicators, they are directly linked to “inputs”, the day-to-day actions your company can focus on to achieve its goals.

3. Long-Term Thinking: Focusing on inputs liberates your team to invest in initiatives that may not have immediate payoffs but can create lasting value by compounding over time with consistent effort by the organization.

Creating Your Reporting Suite in Power BI

Your brand new KPIs need a place to live. Power BI can be your biggest ally in creating a centralized repository of analytics information. Your goal is to have the leadership team’s attention can be trained on a set of dashboards displaying actionable, targeted KPIs. With good data and clear visuals, your team can get to work delivering results. So, how do you get started in Power BI?

1. Know Where the Data is Coming From: Work with your IT counterparts to identify and access the sources of (accurate) data. Think through all the data sources you will need and ensure that you are able to use them.

2. Ensuring Data Quality: Your team needs to take the time to ensure there are (automated) data quality checks in place to verify and validate the information you use. Nothing will erode trust in the quality of your tools than an inaccurate number.

3. Defining Our Metrics: This is where your hard work comes to fruition. Use Power BI to define the calculations behind your KPIs.

4. Reconciling & Validating: Before publishing your work for stakeholders, your team needs to take the time to reconcile the data in their dashboards against data sources. Your motto here is “trust but verify.”

5. Creating Dashboard & Notifications: Combine all of your hard work into dashboards and reports. This will be where your audience actually consumes information, so be sure to invest some time into making these reports well-designed and aesthetically appealing. Even if you don’t think design is important, your stakeholders often will and it is critical that they take the tool seriously.

6. Creating a Data-Driven Culture: Everything outlined above is just your first step. Always remember that your real goal is to help create a winning organization with a data-driven culture. Having the right KPIs and reporting in place is an important milestone on that journey.

Next Steps

Get started building a data-driven culture for your organization.

1. Step One: What is one critical goal for your team?

2. Step Two: How could you make it actionable, measurable?

3. Step Three: What leading indicator could you focus on to drive success?

In the Next Newsletter

We will learn about the importance of storytelling in business and FP&A.