In the shrewd words of Mike Tyson... "Everybody has a plan... Until they get punched in the face." But let's be honest; not everyone has a plan. Lots of people prefer the "hope and prayer method" of success. I had a business coach who would say to me "Hope is not a strategy." But I always quipped back, yes it is! It's just a bad strategy!!
I use the slide above when teaching project management. But it's just as applicable to managing a business. And Key Performance Indicators (KPIs) are critical for both.
Here is my take on KPIs and using dashboards to share them:
- Comparison of plan to performance is critical for high-performing organizations.
- To compare plan to actual, you must first have a plan, with numbers in it.
- Regular review of the performance measures needs to include the goal and actual performance compared to that goal.
- It's best when the current performance is also compared to similar periods like the previous month, quarter or year.
- When reviewing and explaining performance measures, always work from large to small. That is, from the big picture toward the details. Think Google Earth: Globe. Hemisphere. Continent. Country. State. County. City. Neighborhood. Roof top.
- For businesses, KPIs should include: Total Sales (Top Line). Gross Profit. Net Profit (Bottom Line). And KPIs often include: Cash On Hand. Accounts Receivable. Many other measures of financial health. Most of these economic measures are the "Outcomes." That is, they are backward looking, observations of the results of previous inputs or activities.
- Forward looking inputs or activities might include the number of billable hours not yet billed, a count of sales calls made, proposals sent, trade shows attended, website traffic, or any number of quality measures.
- For project management there first needs to be a "Sensible List" (work breakdown structure or WBS) outlining the scope of work and conforming with the 100% Rule (everything's included). The budget should correspond to the WBS, and so should the schedule. So a comparison of the plan to performance looks remarkably like our simple Mike Tyson plan. When structured correctly, the Project Plan IS the KPIs.
Expect the plan to change, but always compare your performance to the plan. Structure the plan so that you can set realistic, written goals, and compare your performance to that goal. The structure of the plan and the key performance indicators is a long and difficult struggle for many organizations; it's worth it. All high performing teams have measures for the activities and outcomes that are critical for success. And they stay focused on those numbers.