5 min read
Are your KPIs measuring what you really want to know?
A data-driven organization is something everyone wants, of course. No longer making decisions purely on gut feeling, but well-founded with data. That's why companies are increasingly getting started with data analytics software, putting together dashboards within no time featuring various important Key Performance Indicators (KPIs). Yet your organization doesn't seem to be actively steered based on these dashboards. It's almost as if they're used as little reports showing how you performed in the past, without letting you draw any conclusions about the future. What could be causing this? Chances are your KPIs aren't as important as you initially thought.
Do your KPIs measure what actually needs to be measured?
When you notice that your dashboard isn't giving you much steering ability, it's a good idea to take a critical look at your KPIs. Not all KPIs are equally important, and not all KPIs can be influenced by the organization. That's why it's essential to carefully investigate which KPIs are truly relevant to the business. If a particular KPI is never actually looked at, it should be removed or adjusted. 
In addition, a KPI can become outdated because its impact has diminished or the process has been optimized, making it no longer necessary to actively steer by it. Besides choosing the right KPIs, structure is also important. Without a clear structure, it becomes difficult to create focus. As a result, there's a chance that all KPIs get equal attention, or that none get any attention at all. That's why it's very important to take a critical look at both your KPI choices and their structure.
The KPI Tree
By asking yourself whether these really are the most important KPIs and whether you can actually steer the organization based on them, you take a critical view. This lets you check whether you're measuring the right factors and whether these are factors the organization actually wants to steer by. The best way to find this out is by determining what the organization's most important strategic goals are. By taking an organization's strategic goals as a starting point, you can set up a 'KPI tree' in which KPIs are divided across multiple levels. Such a tree visually shows how important KPIs are distributed across the various departments and levels of an organization. This directly links operational and strategic goals. With a visual overview in the form of a KPI tree, you can see that all KPIs are based on an organization's overarching strategy. In the example below, you see a KPI tree aimed at an organization's strategic goal of improving customer satisfaction.
Different types of KPIs
The KPIs in KPI trees need to be measurable and trackable so you can monitor what's happening with them and actually take action when needed. If you're measuring something you have no influence over, there's nothing you can do to change it. There are of course many different types of KPIs, since you can measure all kinds of different factors. However, a distinction is often made between two types of (performance) indicators: 'lagging indicators' and 'leading indicators'.
Lagging indicator: a results-oriented indicator that only provides insight after things have already happened. They are historical in nature and often reflect a response to something that happened a short or long time ago. This is a lagging KPI that is output-oriented. An example of such a lagging KPI is the target weight (in kilos) of someone who wants to lose weight.
Leading indicator: an indicator that directly follows the process. This indicator provides a (real-time) indication of a deviation from the standard. Leading (process-oriented) indicators immediately show whether something is going wrong and/or deviating from the norm, while it can take months before this becomes visible in the reporting. This is a steering KPI that is input-oriented. Examples of steering KPIs for our earlier weight-loss example are: the number of calories eaten, the number of calories burned, and the number of hours spent running per week.
Measure what you want to know
By setting up KPIs based on your strategic goals, you measure exactly what you really want to know. This gives you the means to actively and proactively make adjustments when needed. When you take your strategic goals as a starting point, it's easy to bring structure to your KPIs. Using the KPI tree, you can see exactly which KPIs influence each other and can ultimately help achieve the organization's strategic goals. Once this KPI tree has been set up, it's a good idea to review it every quarter. For example, you could ask yourself whether all KPIs are still being steered by, or whether some have become outdated in the meantime. By looking at this, you ensure that the KPIs in your dashboard remain current and manageable at all times. 
Curious how you can best approach this for your organization? Or do you not yet have an analytics dashboard, but would like to structure one based on strategic goals? Then get in touch with us for more information about workshops and implementation plans.