KPIs are an essential part of any business and help to trigger behaviors that will drive a business forward towards their goals and aspirations. But whilst the basic concept of KPIs is easy to understand, many businesses struggle to recognize the importance of developing, implementing and utilizing KPIs. The car dashboard is a perfect everyday example of KPIs in use and, having used this example over the years for my own business model, I am now passing on this knowledge so that you can benefit from it too. An organization becomes its KPIs; hence why it is critical to get KPI right. Here are eight tips I want to share from what I have learnt about KPIs from the car dashboard:
1. Make KPIs reliable and accurate
Imagine driving whilst knowing that the speedometer or fuel gauge in your car is faulty. How would that affect your driving and the decisions you make? If left unrepaired, unreliable and inaccurate gauges are either ignored or, when used, will fill every decision you make with doubt, indecisiveness and frustration.
What Action Should You Take?
You need to review the KPIs used in your business and be able to validate the data feeding it. You must also be able to determine if the associated plots are reliable and accurately communicate the performance of what is being measured.
2. Make KPIs simple and easy to explain
A few years ago, I had to explain the many wonders of the car dashboard to my then 5-year-old son. Unsurprisingly, he understood everything. The next time we travelled in the car together, I was getting instructions and getting told off if I was driving too fast or too slowly. I also gained a co-driver who kept an eye on the fuel gauge, promptly reminding me to fill up the car whenever refueling was needed. Could you imagine the benefits of making business KPIs so easy to comprehend that a five-year-old could understand what you were talking about?
What Action Should You Take?
Go over every KPI in your business and write short explanations describing the KPI for a five-year-old. This shows you have a basic understanding of each KPI and that each one serves a purpose.
3. Make KPIs visible
Have you ever noticed that a dashboard is easily visible from every location in a car? It must be very clearly visible since my then 5-year-old could see the speedometer and the fuel gauge from the back of my car whilst sitting in a booster seat! Visible KPIs create engagement, and it is engagement that leads to a multitude of benefits for a business. KPIs hidden in the computer of analysts and managers will serve no use or benefit for a company.
What Action Should You Take?
Audit the proportion of your staff that can see the KPIs and publish the KPIs in a central location if you currently don’t to encourage engagement and productivity.
4. Make KPIs easily replicable
Have you noticed that the dashboards and gauges in cars are very similar? I have owned and driven various cars across the range of options available to the general public (a reminder that I am yet to drive Dan Ricardo’s Red Bull F1). And although the makes of the vehicles and their features differ, there isn’t much of a difference in how speed and fuel levels are measured and reported. Take a moment to think about your own KPIs within your business. Are the KPIs in your business measured and reported similarly across all units and dispersed sites?
What Action Should You Take?
Review all your business KPIs and challenge yourself to report and standardize the display of every KPI.
5. Make KPIs trigger action
When we drive, we adjust our speed to match the speed limit. We would also stop to refill the car when the fuel gauge tells us that you’re low on fuel. These gauges on the dashboard help to inform these decisions – their fundamental purpose is to drive action. Interestingly, the decisions we make in reaction to the information presented by the gauges is very instantaneous – exactly what a good KPI should achieve. What actions do the KPIs in your business trigger? And is it easy to identify what actions need to be taken?
What Action Should You Take?
Alongside the KPIs in your business, state actions that need to be taken when the KPI is reporting positive and negative outcomes.
6. Make KPIs forward-looking
Being able to know speed limits on routes you are not taking or the fuel level one hour ago offers no advantage to the driver. The analytics of historical data will assist with mid to long-term initiatives to improve the car’s or driver’s performance. Decisions made in the moment, however, require current data to spot any issues, as well as the effects of any remediation actions.
What Action Should You Take?
Review the KPIs in your business. Are they looking forward and are they promptly demonstrating the effects of remediation actions?
7. Make KPIs bring the best out of your team
How far can you drive without refuelling? Will you reach your destination on time, without breaking speed limits or exceeding the limits of the car? Working with constraints in mind is exactly what business is all about – making the most of the limited resources you have within the constraints imposed by the market.
What Action Should You Take?
Whilst reviewing the KPIs your business uses, you need to make sure that they are giving your employees enough information to push the limits of market constraints within your industry.
8. Make KPIs easy to implement
The gauges on a dashboard are probably some of the most basic components that make up a car. Rigorous and computational analytics are not a necessity when reporting speed or fuel levels. KPIs, on a daily basis, should be easy to implement without the need to invest in sophisticated technology or skill sets. But what makes a KPI hard to implement? Is it data; complex processes; unclear deliverables that lead to confusion and underperformance? Years of experience has shown me that KPIs are only ever hard to implement when the process used to measure them are too complicated.
What Action Should You Take?
Start by reviewing the processes used in your business to update KPIs. How much time is being spent to maintain them? In order to improve the process and the performance of your KPIs, you need a clear understanding of what is necessary and what’s not.
KPIs are early warning systems used to tell businesses how they are doing and how they will do in the future. Therefore, it is good practice to share them with employees and spend time drilling, refining and questioning KPIs. They can be easily ignored in the daily grind, but this is a massive mistake. Experience has shown that it takes leadership and discipline to operate alongside KPIs efficiently and successfully.
As you start to rethink the way you use and track KPIs, remember Peter Drucker’s famous lines – you can’t manage what you can’t measure.
Written by Shivendra Kumar
Shivendra Kumar is the founder and director of Shivendra & Co, a business improvement consultancy that helps businesses resolve problems, remove inefficiencies, reduce complexity and uplift customer satisfaction – quickly. His blogs cover topics related to business improvement, strategy implementation and innovation.