KPIs – are we on the right path?
Optimal selection and collection
For a medium-sized company, the introduction of key performance indicators is an important part of implementing the strategy and vision, which are to be lived by the entire enterprise, not just the executives. The process of implementing the indicators is in fact only the last step in the chain. Introducing correct figures means ”As a decision maker what number should I be getting at which point so that I can then ask the right person the right question?”
To determine this, you need a clear “growth mindset” mentality, holistic communication and clear procedures throughout the company.
Growth mindset vs fixed mindset
For companies that want to adapt to changing customer and market needs, the vision and strategy are the most important ways of determining key figures and representing a new conception of the company. “Growth mindset“ applies to all employees of the company who want to take part in the 4.0 revolution. There are various basic concepts and rules that must be considered in the development of this mindset:
- Top down approaches (mission – vision – strategy)
- Mission-vision lived by executives and employees alike
- Challenging but attainable goals
- Exclusive use of strategic indicators
- Less is more when it comes to the quantity of figures
- Communication and culture of trust in the company
- Organise key figures on a sheet; they should be precise and based on trends
- Actively adjust the KPIs to the changes in the company
- Consider the strength of the enterprise
Starting with mission, vision and strategy
How should you introduce KPIs? Should the focus be on strategic KPIs?
It is better not to define KPIs until discussions about mission and vision have been completed. This is the first point at which concrete indicators can be defined.
In the case of unclear and uncoordinated KPI proposals, people often wonder why these were important and why they were selected in the first place. It is always important to have a mission and vision in your head when defining strategic indicators, whether consciously or not. The danger is that those involved often have very different ideas and are sometimes even pulling in opposite directions. It therefore makes sense to compile these different ideas to create a mission and vision and communicate these openly.
The route to be taken must be clear and realistic.
Identification of early indicators
Once the strategic objectives have been developed, the focus is on identifying early indicators and then the KPIs. In other words, you should first deal with the early indicators and then with the late ones.
But why focus on early indicators at all? Because we are not accustomed to thinking in processes. Most of the time we think in terms of starting and end points and thus miss the effect of a new cause. If we want to lead strategically with KPIs, we have to analyse the processes and developments and represent their characteristics with the selected indicators.
The most important factor is the analysis of processes and the determination of dependencies. This helps us learn more about the workings of the company and better exploit leadership potential. The identification of the early indicators will help us!
Implementation of key figures: ”balanced scorecard”
Each company should determine the 1) perspectives 2) timing and 3) indicators for the specific creation of performance required.
The better these three dimensions are implemented, the more effective the management work can be with the help of the balanced scorecard. The scorecard can help both push and anchor the changes.
The introduction plan
Experience shows that the introduction of a balanced scorecard depends on different modules:
Vision and strategy
- Introductory workshop
- Individual interviews with the participants of the introductory workshop
- Feedback-seminar and fundamental decision to introduce the KPIs
- Intensive training with the balance scorecard officer
- Independent working group activities of the officer
- Evaluation workshop of the working groups with presentation of the results and the decision on the implementation of the balanced scorecard in the company
- Definition of strategic objectives and linking with the plan of action for all areas of responsibility
- Definition of KPIs
- Restructuring of the internal reporting system
- Regulations of the balanced scorecard process
The key figures and their implementation process (mission, vision, strategy, balanced scorecard) help the company create competitive edge and influence the market in its favour. The resolute implementation of KPIs helps the company survive, giving it the scope to define focuses and actions which can hugely impact the business.