Does your board focus on the KPIs that matter most?
As human beings, we tend to stick with what we are used to and what we know works well.
The same goes for boards and the company KPIs they monitor.
When working with boards, we ask what KPIs (beyond traditional financial figures) will tell them whether the company is executing on the strategy. Usually, board members come up with extremely thoughtful and spot-on suggestions.
However, when looking at the board’s KPI dashboard, there is not always alignment between the data the board gets and the data the board members suggest.
For instance, we recently worked with a board that said that building a successful pipeline of new products would be essential for succeeding with the strategy. They were concerned that they did not have any early indicators telling them how the company was doing in this area. They could follow the overall revenue growth or the lack of it – but then it would be too late. When we articulated the challenge, the team quickly agreed to define and follow up on a new KPI: The total conversation rate of sales of new products relative to older well established products. Additionally, the team introduced a new KPI showing the percent of products in the R&D pipeline that got approved from one phase to the next phase.
Good KPIs measure progress on outcomes that indicate whether your organization is moving toward its vision of success. It can be smart to define a few key focus areas beyond revenue and profit – focus areas that will significantly move the needle toward achieving the vision. For each of these areas, define just 1 to 2 KPIs indicating the health of this area, and begin to measure whether these are increasing, decreasing or remaining stable. Things like employee retention and customer satisfaction are just two examples of areas where improvement in indicators can create longer-term benefits for the business.
Ensure your board reviews the KPI dashboard on a regular basis, and ask yourselves this question: Given the company strategy, what performance data would be the strongest indication of a successful strategy implementation?
For further reading, here’s an excellent related article published in HBR Sept. 23, 2021 (Harvard Business Review, mainly for subscribers.
If your board would like assistance with reviewing and improving your KPI dashboard, don’t hesitate to contact us at email@example.com.