1Goals and results
What the business needs to achieve and which results lead there.
KPIs for Business
Metrics should change actions. We choose a few metrics a person can influence, tie them to the economics and check what incentives they create.
Sound familiar?There are many metrics, and no decisions are made based on them, Departments improve their numbers at their neighbors' expense, The metrics aren't connected to the economics of the business
Management and Development
How we work
1
2A few metrics
For each role, two or three numbers it influences, and one leading indicator that moves before revenue.
3Rhythm and consequences
Where and how often deviations are reviewed, and what happens if a target is missed.
4Checking incentives
Whether the metrics push people toward behavior that harms the customer or a neighboring department.
Sound familiar?
- There are many metrics, and no decisions are made based on them.
- Departments improve their numbers at their neighbors' expense.
- The metrics aren't connected to the economics of the business.
What usually lies behind it
A metric works when a specific person can influence it, when a deviation has a consequence and when it moves before the result does. If even one of these is missing, the metric becomes reporting. A separate danger is harmful incentives: people start hitting the number instead of doing the work.
What you get
A system of metrics by role, with formulas and data sources.
Leading indicators for weekly review.
Rules for reviewing deviations.
A list of risks: where a metric might push people toward harmful behavior.
The cost of waiting
If nothing changes
- 01
Reporting will grow, but control won't.
- 02
Departments will keep arguing about the numbers.
- 03
You'll learn about problems after the result, not before.
When you don't need this service
- The numbers can't be trusted. Metrics built on unreliable data are more dangerous than none; records come first.
- Roles and authority aren't defined. Nobody will hit a metric that has no owner; the management system comes first.
How to tell it worked
Decisions based on numbers
how many decisions in a month changed because of a metric.
Consequences
what happens when there's a deviation.
Early warning
whether you learn about a problem before it shows in revenue.
Questions
How many metrics do we need?
Two or three per role. With more, a person chooses which to hit, and chooses the convenient ones.
Can pay be tied to the metrics?
Yes, but only after the metrics have run for a while without it and it's clear what incentives they create.
What is a leading indicator?
A number that moves before the result: response time to an inquiry, the number of first meetings, the share of completed records. Those are what you can manage; revenue reports on the past.
Related
Services: Management System · Management Accounting · Sales Management Materials: Delegation that doesn't fall apart · The owner's glossary Cases: Wells Fargo
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