Having a solid strategic plan is crucial for any business or organization. However, creating the plan is just the first step. To ensure your strategic planning efforts are successful, you need to measure progress and results using the right key performance indicators (KPIs) and key early indicators (KEIs). At Forrest Advisors we call KPIs lagging indicators and KEIs leading indicators.
Just like a captain needs instruments to navigate a ship safely, you need KPIs and KEIs to steer your strategic plan in the right direction. Without them, you’ll be sailing blindly with no way to course-correct if you veer off track.
What are KPIs and KEIs?
KPIs (Key Performance Indicators) are the most important measures that show if you’re achieving your strategic goals. They provide insight into what you need to track to move your organization forward.
Examples of common KPIs include:
- Revenue growth
- Customer acquisition
- Operational efficiency
- Employee engagement
KEIs (Key Early Indicators) are data points used to track specific processes or activities. They feed into and support your overall KPIs.
For example, website traffic and conversion rates are metrics that roll up into the KPI of customer acquisition.
While KPIs are high-level guideposts, metrics are more granular performance measures. Both are essential for measuring strategic planning success.
Selecting the Right KPIs and KEIs
Not all KPIs and KEIs are created equal when it comes to your strategic plan. It’s critical to choose ones that align with and support your specific objectives.
Tie Them to Strategic Goals
Your KPIs should be directly tied to the strategic goals you’ve outlined. If revenue growth is a top priority, metrics like sales by product/service and average deal size become highly relevant.
Ensure any metrics you track ultimately roll up and give insight into your key performance indicators.
Keep It Simple and Focused
According to a Gartner survey, nearly 9 in 10 companies struggle with having too many metrics to manage effectively. Aim for no more than 3 KPIs per initiative, with 3 metrics or KEIs per initiative.
Prioritize KPIs and KEIs that will have the biggest impact on achieving your strategic objectives. More isn’t better – it can lead to overwhelming complexity.
Balance Leading and Lagging Indicators
Some KPIs, called lagging indicators, measure outcomes like revenue or customer churn. While important, they only show results after the fact.
KEIs, called leading indicators, are predictive measures that can foreshadow future performance. Sales pipeline and marketing qualified leads are examples that predict sales numbers.
Use a mix of leading and lagging indicators to get a complete picture of your strategic progress.
Implementing KPI and KEI Tracking
Once you’ve selected your KPIs and KEIs, it’s time to set up processes for metric tracking and reporting.
Identify Data Sources
Determine where all the data will come from – CRM, marketing automation, financial systems, etc. Ensure these sources are reliable and integrated where possible.
You may need to implement new tools if you lack visibility into certain areas. For example, project management software to track operational metrics.
Establish Data Collection
Define standardized processes for collecting and rolling up data into your metrics and KPIs. Automate as much as possible to ensure accuracy and consistency.
This may require cleaning up existing data and training teams on new protocols. But the effort is worthwhile for solid, trustworthy performance data with a common definition for each KPI and KEI.
Report and Visualize Progress
Determine the ideal frequency for reporting on your KPIs and KEIs – weekly or monthly. More frequent may be better for leading indicators you need to keep a close pulse on. We do not recommend reporting more frequently than weekly or less frequently than monthly.
Utilize performance dashboards to visualize all your KPIs and KEIs in one place. This makes it easy to spot trends and drill down into problem areas. According to one industry study, companies with dashboards are 2x more likely to achieve better data consistency and accuracy.
Communicate Results
Don’t let your performance data get siloed. Ensure all relevant teams understand the KPIs and KEIs being tracked, why they matter, and remove any ambiguity of interpretation.
Celebrate wins, but also be transparent about shortcomings. This builds accountability and rallies people around course-correcting when needed.
Reviewing and Refining
Measuring strategic success isn’t a set-it-and-forget-it task. Your KPIs and KEIs need continuous review to ensure they remain relevant and effective.
Monitor and Analyze
Have a structured process for regularly reviewing performance data across all your KPIs and KEIs. Note any concerning trends or patterns that emerge over time.
Dig into the root causes behind any major variances from your targets. This analysis is key for determining if adjustments are needed.
Refine as Needed
Just because you committed to certain KPIs and KEIs upfront doesn’t mean they’re permanently set in stone. If they prove to be misaligned or ineffective indicators of strategic progress, be willing to modify or replace them.
As your organization’s priorities and objectives evolve over time, so should the performance measures you’re tracking.
Key Areas to Measure
While KPIs and KEIs will be unique to each strategic plan, there are some key areas most organizations should be measuring:
Clear Objectives
Perhaps the most important measure of strategic success is whether you achieved your original objectives. Did you hit your revenue growth targets? Gain market share as planned?
Clearly defining measurable goals upfront is critical. Otherwise, you’ll lack a solid benchmark for assessing true strategic performance. Do not leave metrics as a % increase without defining the baseline
Efficiency
According to one industry study, only about 60% of an organization’s resources are spent on value-creating activities. The rest is wasted on inefficient processes and excess costs.
Metrics around productivity, resource utilization, and cost-effectiveness can reveal opportunities to operate more efficiently in support of your strategy.
Quality
Meeting or exceeding quality standards is essential for long-term success. Metrics in this area include defect rates, customer satisfaction scores, net promoter scores, and more.
Tracking quality measures ensures you don’t achieve other strategic goals at the expense of deliverable excellence.
Accuracy
In addition to hitting your targets, it’s important to assess whether you executed as intended. Variance analysis can reveal disconnects between your strategic plan and actual implementation.
This allows you to refine your planning assumptions, adjust for realities on the ground, and improve future strategic accuracy.
FAQs on Measuring Strategic Success
What’s the difference between KPIs and KEIs?
KPIs are high-level performance indicators tied to your strategic objectives, while KEIs are more granular measures that feed into and support the KPIs. We refer to these as lagging indicators and leading indicators.
How many KPIs should I track?
Aim for 3 KPIs and 3 KEIs per initiative. Having too many can lead to overwhelming complexity and can ruin accountability for an initiative or workstream.
What are examples of leading and lagging indicators?
Leading (predictive) indicators include sales pipelines, marketing qualified leads, and employee engagement. Lagging (outcome) indicators are measures like revenue, customer churn, and profit margins. The goal is to have KEIs that are early or leading indicators that can then drive adjustment actions before a problem becomes entrenched.
How often should I report on KPIs and KEIs?
Reporting frequency depends on the metric, but generally monthly reporting is required for strategic measures. More operational metrics may require weekly reporting if the granularity actually leads to actions being taken outside a steering committee meeting each month.
How do I ensure data accuracy for KPI tracking?
Implement standardized processes for data collection, integrate data sources where possible, and leverage automation to eliminate manual errors. Also validate data integrity regularly. All of these can be handled by an internal BI team.
Continuous Improvement is Key
Measuring the success of your strategic plan isn’t a one-and-done task. It requires an ongoing cycle of defining the right KPIs and KEIs, implementing robust tracking processes, analyzing performance data, and refining your measures as needed.
By diligently monitoring your strategic progress, you can course-correct quickly when you veer off track. You’ll increase accountability and alignment across your organization. And ultimately, you’ll be better positioned to achieve your long-term objectives.
So don’t just create a strategic plan and set it aside. Treat KPI and KEI management as a critical discipline that will propel your strategy’s success over time. When done right, performance measurement keeps your entire organization laser-focused on what matters most.
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