Monday, September 27, 2010

KPIs - a really powerful tool

"Not everything that can be counted counts, and not everything that counts can be counted."
Albert Einstein, (attributed)
US (German-born) physicist (1879 - 1955)

Albert EinsteinImage via Wikipedia

Deciding on a set of KPIs is one of the most important things we normally do when starting to work to build the business with a founding team.
What to measure? how frequently? what to publish? and to whom? are all good questions to be thought about.

Key Performance Indicators are a fundamental tool, the dashboard by which the company is monitored, guided, controlled and managed. It is surprising how frequently this really simple device is not properly used.

In many traditional businesses, the monthly management accounts serve as the barometer of corporate health and comparisons to budget help to drive actions by the philosophy of 'management by exception'. This approach is completely out-dated and inadequate for fast moving web businesses capable of generating vast amounts of meaningful data in real time.

Distilling all this data down to the key numbers and tracking them against expectations is where the effort needs to go in setting up the set of KPIs that are going to drive the business.

No board should burden the management team with data requirements beyond those which are needed to run and plan the business, so an agreement as to the KPI set - should be sought as soon as possible.

Make sure that everyone in the senior team 'owns' one of the KPIs.  The big goals of the business which are agreed by the board should be represented at the targets against which the KPIs are measured.

I like to get an email containing KPIs at least once a week (preferably auto generated, untouched by human hand) and in some cases every day! I find this no burden at all - its easy enough to glance at the headline (in the subject line) and delete.

Some teams prefer to give non-execs access to the analytics or admin dashboards inviting them to look up the numbers when it suits.
For me this misses a very important point. That of being 'top of mind' for your board. Most NEDs sit on multiple boards and if you want them to think about your business and provide meaningful, helpful advice, contacts etc then its best that you keep reminding them of your existence.

You'd be amazed at how efficient your board meetings can become when everyone is up to date with the performance, has lived through the month's ups and downs through the KPIs and has a good idea of where the issues lie.
You will spend less time reviewing the month past and more time discussing the issues and planning the future.

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