How to Create KPIs that Drive Real Results

Our founder, Bernie Smith, is often asked how to create KPIs and measures. It’s not a short process, which is why most people end up brainstorming or using existing measures when they attempt this task.

However, there is a better approach: the Results-Orientated KPI System (ROKS) method. Although it’s not a short process, this is an actionable and repeatable process. Through years of hands-on consulting experience, Bernie has distilled the core elements of the process of developing key performance indicators. Here is an introduction to the key steps in designing new and effective metrics that will drive your organisation towards its strategic objectives.

1 - Understanding and aligning the business objectives with our business strategy

The first step in this process is always to clarify where exactly we are trying to go and later to map out the things we need to track to ensure we’re heading that way. We do this by completing the following tasks in the order below.

• Review organisation strategy documentation. Make sure you understand not just the words of the document but the ideas behind it.
• Identify strategic objectives. It can be hard to translate strategy into something more granular, but very often a business strategy document will have clear strategic objectives. These objectives can make a great starting point for selecting our measures.
• Find out exactly what questions you are trying to answer. Without knowing what question you are trying to answer, you will only pick the right measures by accident. If you can’t identify the question, you really shouldn’t go on to the next task until you can answer it, however tempting. What are you trying to achieve with your KPI measurement?
• Decide how you will break down the strategic objectives into measurable quantities. Without the right method and know-how, this task can be quite difficult to accomplish. Fortunately, there are a number of techniques for doing this. Here at Made to Measure KPIs, we like to use KPI Trees which were invented by Bernie in 2007. KPI Trees are all about translating high-level strategic objectives into meaningful key performance indicators. We even teach you the basics of exactly how to use this method on our website - absolutely free. Visit our Ultimate KPI Tree Guide which includes a complete run through of the seven steps to build a killer KPI Tree, four checklists for running KPI Tree Workshops with your team, and plenty more. Later in Step 3, we will be applying your chosen technique. Whatever technique you use, by the end of it you should have a visual representation showing how your measure or KPI connects to your strategic objective. This is often done through layers of intermediate results or outcomes. Here’s an example of a KPI Tree for the strategic objective that pretty much everyone can buy into: ‘Be Healthy’

2 - Engaging stakeholders and assessing where they currently stand

The value of this step should not be underestimated or overlooked. In the process of designing and implementing new KPIs, we want buy-in from our teams, or at a minimum, no resistance against the process. Here are a few tasks to do just that:

• Identify key stakeholders and subject matter experts. There are two very good reasons for engaging key stakeholders and subject matter experts. Firstly, they know a lot. Secondly, they are much more likely to agree with the outcomes and findings if they’re involved in the process of deciding them!
• Train stakeholders and SMEs to report and present data and KPIs effectively. One thing all performance management experts should understand is that it is not the data alone that drives growth, but rather the insights. What good will your new KPIs be if the people who need to use them to make smart decisions struggle to extract the valuable insights your new KPIs provide? Again, be careful not to underestimate the value of training according to a tried-and-tested reporting approach. There are many purported approaches out there, but over 17 years of hands-on experience, Bernie has seen the tangible results produced by his Brilliant Dashboards approach. He teaches this approach in his on-demand course, Designing Brilliant Dashboards Rapidly. This course equips students with all the sound design principles they need to enable effective transfer of insights to those who need them, which can be applied to any report and any reporting tool. Training up people in this approach early on brings a fantastic level of buy-in from stakeholders.

• Review existing reports and dashboards. Go through existing reports and dashboards and critically analyse what is successful or unsuccessful about them. Better still, get the key stakeholders and subject matter experts to critique them.

3 - Create the measures “longlist”

Now we will get to work on creating one big list, which we call a “longlist”, of all the possible KPIs that relate to your specific strategic objectives. Don’t be alarmed; we certainly won’t be implementing this entire list! However, this step shouldn’t be skipped as it provides the foundation for selecting our most relevant current KPIs and for scheduling the implementation of other valuable KPIs in future, even if they seem impractical right now. Complete the tasks below.

• Create a draft KPI Tree (or “results map” if you use a different technique). Using your preferred method for mapping strategy into measures or KPIs, you should come up with a longlist of potential metrics. It is often worth refining or polishing this longlist by meeting up again with your SMEs or key stakeholders.
• Keep revising your results map and longlist until you build consensus and agreement amongst your stakeholders and SMEs. Remember to check out our Ultimate KPI Tree Guide for a ready-to-use approach to both these tasks, including four checklists for running your own longlisting workshop with your team.

4 - Create the measures shortlist

Now that you have the longlist of all the possible KPIs related to your strategic objectives, we’re going to have to extract the most pertinent KPIs to actually implement. Following these tasks should get you to that point.?

• Hold a shortlisting workshop. When you have a longlist, it is time to rationalise that list. You can do this using a simple 2 x 2 matrix called a Priority Matrix. On the X-axis, you have two categories: ‘able to gather’ and ‘hard/not able to gather’. On the Y-axis, you have a further two categories: ‘important’ and ‘trivial’. The matrix will look something like this…

• Agree “use, aspire or discard” list. From the shortlist you can easily create a “priority” category and an “aspire” category. The priority category contains those measures which coincide with 'able to gather' and 'important'. The “aspire” category includes those measures and KPIs which fall into? the 'important' category but also the 'hard/not able to gather' category.
• Develop the action plans for “use” and “aspire” lists. Using action lists and project plans, you can create a programme for implementing new measures or collating existing ones. What’s more, your Aspire list can become the foundation for dynamic performance measurement that evolves over time - come back to it at regular intervals and make a plan to implement one or two from that list over time.

5 - Clearly define the shortlisted KPIs

Now that we have decided our final list of KPIs, we need to clearly define how each KPI is calculated and documented and we need to identify factors that may impact on accuracy. It is common to think that we know how a KPI is calculated, only to then uncover significant differences in real world application. Often these differences come from 'edge cases'.?

For example, when calculating staff utilisation (actual billed hours / available working hours) there are lots of 'edge cases' we might need to be clear on: Should we include, or exclude: sick leave, training, loans to other teams, discounted billing rates (and so on) from the 'billed hours' or 'available working hours'? These basic questions can have a substantial impact on the final figures.

To reduce these risks and difficulties we need to properly define our measures and KPIs. Complete the tasks below to get this done.

• Properly define your measures according to a standardised and systematic process used firm-wide. Having your measures properly defined increases confidence in those measures and the reliability of the outputs. We offer a comprehensive, step-by-step guide and a free downloadable template to assist you with this task: 'Define Your KPIs in 10 Steps' (including our free KPI definition template)?

6 - Design dashboards and reports

Now it’s time to use those training skills and that dashboard improvements list from Step 2. Complete the below tasks to make sure your team can harness the power of your new performance measures effectively.

• Identify report stakeholders and Terms of Reference for use. Terms of reference (TOR) set the context for use of the report. Having good terms of reference enable you to justify the content and structure of your report. Without this context, it becomes easy for people to tear into the design decisions and choices you have made.
• Prototype the dashboards. When your measures are in place, then you can start to pull together proposed dashboards. It makes sense for these proposals to be in draft form, so you can easily change them based on user feedback. Visio, Figma or even PowerPoint can be useful tools for creating mockups quickly.
• Review the prototype proposals with a live revision session. If you can, get your stakeholders in a room and make changes to the draft dashboards in real time. This can save a huge amount of to-ing and fro-ing on the approval process. If you can’t get a live session together then you will need to go through a formal approval process. This will normally involve multiple emails and formal agreement from a predefined list of stakeholders.
• Once you have sponsor approval…

7: Go live with the agreed dashboard/report

• Produce the dashboard/report. Think carefully about the production process. Initially, production will normally involve lots of copying and pasting in and out of Excel. It’s worth looking at existing business intelligence tools you may have, such as Qlik, PowerBI or Tableau and seeing what scope for automation there is.
• Issue the first production version of the report. Get the first report out as soon as possible. If you don’t do this, you can find the organisational enthusiasm withers and dies before the first report ever sees the light of day.
• Actively seek user feedback and tweaks. Perceived intransigence can also damage the reputation of an MI/BI department or of a specific report or dashboard. Take feedback on board quickly, openly and courteously.
• Revise and refine the dashboard throughout the “nursery period”. Keep up the support for a pre-agreed nursery period. It is this stage in the process that will often have the biggest impact on the success or failure of a report or dashboard, so make sure you don’t skimp on it.

These seven core elements form part of the ROKS method, Bernie’s innovative approach to performance measurement. To account for the distinct needs of different business sizes, Bernie tailored this methodology and created ROKS Express for small businesses and ROKS Enterprise for corporations. Each method is broken down on our website, accessible to anyone at no cost.?

However, the journey to KPI mastery extends beyond these steps. Crucial aspects such as measuring intangible outcomes and designing inexploitable targets require deeper insight. This is where Bernie's ROKS KPI Black Belt programme comes into play. It's an all-encompassing certification training that guides you through every intricate detail of KPI design and implementation. By joining this programme, you'll gain not just knowledge but also the practical skills to develop KPIs that drive real change. Discover more on KPI Academy.

Remember, effective KPI measurement can sometimes attract criticism because of what it shows, but this can often be misconstrued as criticism of the system. It’s essential to discern the nature of feedback to avoid unproductive debates.

As you apply these insights, trust your team to manage the day-to-day, and feel free to enjoy a moment of relaxation – perhaps a visit to the bar is in order.

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