by Warren Hayford
The monthly reports you produce provide plenty of detail on the performance of your organization but odds are they are missing a key component. What’s missing is the reason the change occurred. Without the reason you could be wasting resources by focusing on the wrong actions.
Key Performance Indicators (KPIs) that measure the causes of a change can be scattered in different functions or organizations.
If your reports don’t pull those back together and allow you to see those key performance indicators along with the change, you will not be able to determine the reason for the change.
Most reports only show numbers for one or two periods at a time. You see the performance for this month and maybe the same month last year. The problem is two periods do not give you enough information to make a reasonable guess about the future.
View Numbers Over Time
If you want to understand what caused a change, you need to see at least a year’s worth of numbers. When you look at a series of numbers rather than an individual number, you can see the difference between gradual changes and event-driven changes.
For example, if your Sales have increased 15% since the last period, you do not know the reason. A spike in Sales could be caused by an increase in prices, a large single new order, or a steady increase in Sales.
Without the perspective of multiple periods, you might never see what caused the change in your Sales number. This often leads to decisions based on assumptions rather than facts.
Why Compare To Other Organizations
Most organizations do not make comparisons with external organizations. Perceptions that prevent this include:
- Our business is unique
- Numbers are not available
- There isn’t enough value to warrant spending the time
Ignoring comparisons is giving up a valuable tool for managing your business. Without this comparison, you cannot see how much of the change that has happened is related to your actions and how much is related to changes in the external environment or the economy.
Availability of numbers and the time it takes to collect them are reduced through the internet. Publicly traded companies must report their numbers to the SEC. The SEC makes these numbers available for free. The value gained by making the comparisons far outweighs any other issues.
No KPI Is An Island
Every measure you track is either a function of or directly impacted by other KPIs. For example, Sales is a function of the number of sales people, the current promotions, the relative pricing and quality of your products and your customers’ need for your product.
When a KPI changes you need to look at other KPIs. Look at the drivers to understand why it changed. You also want to look at the KPIs impacted by the change. Understanding the interrelationships between your KPIs gives you a more complete view of your performance.
Chart Your KPIs And Their Drivers
No one has the time to constantly receive and interpret new numbers. Help yourself and your constituencies by charting your KPIs and drivers. Charts provide three advantages:
- Everyone Understands Charts
- You control the focus of what is presented in the Chart
- You can flexibly present all of the types of comparison quickly and easily
Take advantage of these strengths and provide your organization with better feedback and analysis. You will simplify the analysis of why a change occurred. You will reduce the time it takes to get the message across. An as an added benefit you can apply the saved time to actions that improve performance.
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