Are Your KPIs Sabotaging Your Strategic Plan?
Why would you track a metric called liver if what you want to make is ice cream?
“The board I’m sitting on chose to increase revenues by x amount of dollars as their KPI. Though the company achieved that KPI, it turned out to be the wrong one because there were too many other problems that should have been addressed first.”
I was told this insight in confidence. My friend, who sits on many boards as a financial expert, was being vulnerable in sharing a common problem facing most boards — how to set the right KPIs and prevent loss.
Put simply, why would you track a metric called liver if what you want to make is ice cream?
What’s your tasty recipe?
Choosing the right KPIs is a lot like writing a delightfully tasty recipe.
First, we must decide what we are making. That’s the strategic goal we want to achieve.
Setting the right strategic goal can be a challenge for the best of us. Every board member comes to the table with their own perspective, and we both know that what’s tasty for one might not be tasty for another. So, how do we reach agreement on a common strategic goal?
The answer is simpler than you think. It’s about choosing a strategic goal that is not just focused on outcomes but is also sincerely human. Allow me to explain.
Increasing revenues by x amount of dollars over the next twelve months is a desired outcome, but how does it nurture human capital, for example? If your HR department head, Jenny, is allergic to peanuts, and you’re putting peanuts in your business recipe, your decision is bound to negatively affect Jenny’s department and many others.
Choosing the right strategic goal means involving all the moving pieces in the decision, including the advisory board, the daily management team, the employees, and the customers. Yes, the customers too!
What savory ingredients do you need?
Once we’ve agreed on our common strategic goal (the delightfully tasty recipe we want to make), it’s time to focus on the list of ingredients…what we have on hand and what must be acquired to realize our common strategic goal.
Now might be a good time to mention that KPIs are often erroneously used to measure the efficacy of each ingredient on hand. The main problem with that approach is, separately measuring the efficacy of each resource at our disposal won’t tell us how our aggregate business recipe will taste.
Put simply, why would you track a metric called liver if what you want to make is ice cream?
Choosing the right KPIs means tracking the right ingredients and their impact on the aggregate. What this means is, your KPIs must be directly linked to your common strategic goal, and they must be relevant, meaning your chosen KPIs must also track value added.
When used properly, KPIs measure the gap between where we’re at and where we want to be while simultaneously measuring value added.
However, since KPIs are often erroneously only used to measure the ingredients we have on hand (where we’re at), we’re left with liver for ice cream?
What are your procedures?
- Agreed on a common strategic goal? ✔️
- Strategically evaluated the resources on hand? ✔️
- Agreed on what resources to acquire? ✔️
- What are your procedures to ensure your business recipe is a resounding success?
You can’t roast beef in the fridge!
Which leads me to ask…
Is There an Emotionally Intelligent Chef in The House?
Knowing which procedures to follow is best achieved through a profoundly practical Emotionally Intelligent process. A profoundly practical Emotionally Intelligent process relentlessly challenges our perspective (what we think our business recipe should taste like) to show us how to play a bigger game (delivering more palatable results).
What brings our common strategic goal to delightful fruition is a genuine accountability process that adds the right ingredients in the right order for the right outcome.
No more confusing liver with ice cream!
Hear me out.
Most advisory boards believe they are “it” when it comes to accountability. However, an advisory board can’t say they’re accountable because “they’re in it.” Allow me to elaborate.
Who’s the biggest accounting firm in the world? This accounting firm does the books for large corporations and holds them accountable to follow the rules and regulations of the countries they operate in. Now, who do you believe holds the biggest accounting firm accountable?
My point is, even the biggest accounting firm in the world must be held accountable by the country or government it operates in.
It is impossible to be fully objective while being fully invested.
Accountants need accountability, just as advisory boards must have an objective, external, genuine accountability process to ensure their business recipe is a resounding success.
What Might We Conclude From Our Introspection Into KPIs?
Confusing liver for ice cream or trying to roast a beef in the fridge points to a lack of awareness of what truly matters for the aggregate: adding real value (adding value on top of value).
A genuine accountability process adds value on top of value because it delivers a profoundly practical Emotionally Intelligent process that genuinely holds us accountable to implement the right procedures in place, so we can choose the right KPIs and prevent loss. A delightfully tasty recipe!
Keeping that in mind…
What is it that you know (that works) that’s blocking you from choosing the right KPIs and preventing loss?
Share your thoughts in the comments below. Let’s start a conversation.
My name is Anne Beaulieu. I assist highly successful women entrepreneurs in creating and implementing a strategic plan that meets their needs while genuinely holding them accountable to commit to and fulfill an ever expanding vision.
