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Executive teams are very familiar with using KPIs (Key Performance Indicators) to track recent corporate success. If properly constructed, KPIs can become a powerful tool to predict changes around the corner for your business. What are the secrets to reach this objective?

START WITH SUCCESS – The end goal for any business is survival and growth. This requires the support of many stakeholders, which have a sort of causal relationship on one another you can use for predicting success. For instance, by keeping employees happy, you can predict this will improve the relationship with suppliers. Good employee and supplier relationships in turn can drive great outcomes for customers, and so on, leading to results for investors.

TRACKING RELATIONSHIPS – the full predictive ability of KPIs is unleashed by first tracking relationships. This entails reviewing the relationship that each key stakeholder group has with the company. This is a two-sided process: the company wants something from its stakeholders in exchange for providing something they want.

MAPPING KPIs – to understand how one KPI affects another it is necessary to map the relationship between KPIs themselves. A useful tool is to draw a cause-and-effect diagram, using KPIs to monitor the whole chain. For instance, profits are driven by revenues and market share, which in turn are driven by the KPIs for what customers want from the company (e.g., product quality and customer service), which in turn are driven by KPIs for suppliers and employees.

SETTING RIGHT MEASUREMENT INTERVALS – a measurement interval is the time between readings on a KPI. For instance, assessing employee satisfaction via an annual survey is not going to be a useful predictor of monthly employee turnover data.

By adapting these steps, producing a scorecard of KPIs will become a valuable way to represent dynamically the growth prospects of your business!

Last but not least: ACT! KPIs without actions are just a picture…

[Complete article, “KPIs Aren’t Just About Assessing Past performance”, available at https://hbr.org/2021/09/kpis-arent-just-about-assessing-past-performance]