The best business KPIs satisfy these 4 principles

"Not everything that counts can be counted, and not everything that can be counted counts." – Albert Einstein

Many businesses measure the wrong things and wonder why they are not successful. Some businesses measure the right things, but the results are inaccurate or received too late. Some leaders measure, and try to stay on top of, too many things. In my experience, measuring too many things is very dangerous. It dilutes leadership focus away from what matters most.

So what are the best KPIs for your business?

The best KPIs vary for each business depending on their unique strategic context, ambitions and priorities. Successful leaders we work with keep four principles front of mind when selecting the right KPIs for sustainable results.

The 4 best business KPIs:

1. Facilitate better leadership conversations

   Measures should be centred on what you and your leadership team need to be paying attention to and have conversations about. Typically, leadership teams don’t spend enough time collaborating on the big strategic questions facing their business. For example: "How do we improve the end-to-end customer experience to accelerate top line growth?" Selecting and discussing progress against KPIs such as Net Promoter Score, customer loyalty, and size and frequency of purchase would assist you and your team to have more informed conversations than if you simply talk about monthly financial numbers.

2. Enhance understanding and result in actionable insights

   There is no point in having measurement data if it doesn’t strengthen understanding of how the business creates value for key stakeholders. Even if it is well understood, do the results and subsequent conversations result in actionable insights? What do the trends in results mean for the business, and importantly, what steps does the leadership team need to take to keep raising the bar on performance? As Austin Powers says on receiving a briefing on a secret mission: "Whoop-dee-doo Basil, what does it all mean?"

3. Focus on the enablers not just the outcomes

   Both lead and lag indicators have important roles to play in how you keep score and improve business success. In my experience businesses do not focus enough on the right lead indicators. This is because lead indicators are harder to identify and measure than lag indicators. Focusing on measures that reflect the cause and effect relationships of value creation for your business can lead to transformational results. For example, in an effort to improve performance of their call centre, one company initially focused on measuring the average time call centre operators spent talking to customers and linked bonuses to shorter conversations. This leads to dysfunctional behaviour with operators simply transferring calls or just hanging up to ensure they achieved their bonuses. By switching to measuring customer resolution and satisfaction, the company was able to correct the wrong behaviour.

4. Are timely and readily available

   Ask any comedian, chef or tennis player: timing is everything. It can make the difference between a standing ovation, a perfectly cooked meal or winning Wimbledon. Similarly, in business, timely delivery of insights can make the difference between success and failure. ‘If only we had known earlier’ is the catchcry for many underperforming leaders. There is an old saying: what gets measured gets done. I would add that the results of these measures would need to be visible by the right people at the right time. Teams and individuals perform better when they are keeping score.

Is your business using the best KPIs?

As a first step, ask yourself: "For the monthly performance report I receive for my business, how many of the metrics meet the four principles above?" If you score yourself 80%+ in each of the four principles then you are world class. If you score lower, it might be time to engage in a conversation with your leadership team on refining your KPIs to ensure they really are key.