“Other than sales, can you talk about some best practices to develop meaningful KPIs for a specific project?”
After 47 episodes, it would be a challenge to have not covered metrics at some point. Probably the most direct reference we’ve made to this topic was in Episode 032. But this week’s question puts a couple of different spins on this subject that I thought would be interesting to address. The first is the term “KPI,” and the second is the reference to a specific project rather than an overall strategic plan.
First, let’s talk about KPIs. The term KPI, which stands for Key Performance Indicator, has become popularized in business circles for fairly obvious reasons. The thought process here is not just to track your business with a bunch of metrics but, rather, to choose only the most important measurements that tell you how your business is performing. Although this may sound obvious, anyone who has spent any amount of time inside a company knows that you can track just about everything under the sun – and there is often a temptation to do just that. But generating metrics takes time; and reviewing them takes even more. So, if you don’t narrow it down to those measurements that are truly important to your business, you can expend a lot of energy with little or no return.
From a strategic standpoint, there’s an even more compelling reason to get your metrics under control. Imagine driving a strategic team where every function has their own unique set of metrics. Nothing breaks a team apart faster than when one function meets their metrics and another one doesn’t. Although these more detailed functional metrics may still be important to ultimately keep track of, I prefer these not be the metrics that are used to drive an overall strategic plan. The reason is that you generally want your team members all working toward common goals that they can all share in. When everyone is driven toward the same objectives, good things tend to happen – at least that has been my experience. So, having a set of Strategic KPIs, or SKPIs, becomes an important aspect of any successful strategic plan.
(I was kidding about the acronym, by the way!)
Regarding the second subtlety of this question – the fact that it is being asked with respect to a project – the assumption I’m going to make is that we’re talking about a business case rather than an overall strategic plan. For those of you who may not be as familiar with this term, a business case is usually prepared to request funding for a specific development project. Often times, a strategic plan will outline the major “projects” that will be required in the form of a strategic roadmap. These individual roadmap projects will then each get assigned business cases once it’s time for the money to actually be requested.
Although business cases are different from overall strategies, they are by no means separate. In fact, most business case presentations will begin with some tie-back to the product line or business strategy that will ultimately benefit from the project. In this way, KPIs for a project absolutely need to be connected back to the overall strategic KPIs for the product line or business that will be affected.
In order to develop meaningful KPIs at a project level, you should first turn to your overall strategic KPIs and break those down to a project level. So, if you have growth, revenue, margin, and market share KPIs as part of your overall strategic plan, you should develop these same KPIs specific to your project so that you can track exactly what effect your project will have on your overall strategy. In addition to these somewhat more obvious metrics, you might also have some metrics that are related to customer satisfaction, or perhaps operational performance, or even specific project deliverables. But, again, whichever metrics you choose to track for your specific project, you should always tie them back to your overall strategic objectives so that your investors will always know how the project fits in with your overall strategy.
Listen to the podcast episode
Dear Strategy: Episode 047