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 incredibly thoughtful and spot-on suggestions.
However, when looking at the board’s KPI dashboard, the data the board gets and the data the board members suggest are not always aligned.
For instance, we recently worked with a board that said building a successful pipeline of new products would be essential for succeeding with the strategy. They were concerned that no early indicators told 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 new product sales relative to older, well-established products. The team also introduced a new KPI showing the percentage of products in the R&D pipeline approved from one phase to the next.
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 one to two KPIs indicating the health of this area, and begin to measure whether these are increasing, decreasing, or remaining stable. Employee retention and customer satisfaction are just two examples of places where improvement in indicators can create longer-term benefits for the business.
Ensure your board reviews the KPI dashboard regularly, 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 reception@leadershipadvisorgroup.com
Interested in self-evaluation? Try Online Board Evaluations
Well-aligned with national corporate and foundation/charity governance codes, our board clients usually conduct an external board evaluation every three years. However, most national governance codes recommend that boards perform a self-evaluation in the years between external board evaluations. Therefore, we have developed OnlineBoardEvaluations.com, a tool enabling boards to self-evaluate effectively and effortlessly every year.
Quarterly articles and research
We write research and articles of advice on a regular basis. Subscribe to get your summary directly to your inbox every quarter – no strings attached.