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There is a new epidemic hitting businesses today. Many companies are overdosing on, of all things, KPIs.
Business owners can easily kill the effectiveness of their KPIs by trying to measure too many of them at the same time. When an owner first starts using KPIs, they often go crazy. “What gets measured gets done,” they think. Many owners, accustomed to having little to no information and then, all of a sudden, becoming flush with easy-to-read dashboards and succinct metrics think more is…well, more.
But when it comes to KPIs, LESS is more. It isn’t only using fewer KPIs to run your business, you need to make sure the KPIs you do use are effective.
In this series of blog posts we’ll be talking about how to develop a set of KPIs for your business and how you can easily “Kill” KPIs and their effectiveness.
The first way to kill your KPIs is by measuring too many KPIs at once.
How to avoid overdosing on KPIs:
- Take a top-down approach. Start at the top level with your metrics, company-wide margins, for example. Once you know the components of that metric, and have lived with that KPI for a few months, THEN consider adding lower-level metrics (e.g. customer or job profitability) to drive additional performance.
- Think “action” first. You should only measure things upon which you can take action and be able to influence the metric. Just because you can measure the temperature doesn’t make it a metric you can do something about. Similarly, KPIs should be developed with known, specific actions in mind.
- Think 1-2 pages max. Attention spans are short today. So as a rule of thumb, KPIs should fit on a dashboard that is 1-2 pages in length, making sure there is plenty of white space—that means fewer metrics are better.
- Every KPI has an owner. Often times, KPIs are developed and put on a dashboard. They look pretty, but they go stale, because no one has been assigned to be responsible for improving it. One way to limit the number of KPIs is to make sure your team only has 1-2 metrics each that they are responsible for.
Sometimes, it takes more time to edit out KPIs from a dashboard than it does to develop them. When developing your scorecard of KPIs think “less is more.”