Using SMART KPI for Business GROWTH!

A Key Performance Indicator is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. High-level KPIs may focus on the overall performance of the business, while low-level KPIs may focus on processes in departments such as sales, marketing, HR, support and others.

What is a SMART KPI? One way to evaluate the relevance of a performance indicator is to use the SMART criteria.
The letters are typically taken to stand for Specific, Measurable, Attainable, Relevant, Time-bound. In other words:

  • Is your objective Specific?
  • Can you Measure progress towards that goal?
  • Is the goal realistically Attainable?
  • How Relevant is the goal to your organization?
  • What is the Time-frame for achieving this goal?



To get a better understanding of why you should always start the KPI process by having first defined strategic objectives, consider the two potential ways of deriving your KPIs:
Alternative-based decision-making
Value-based decision-making

Alternative-based decision-making relies on choosing your preferred option from the alternatives offered.
Example:
Decision maker: I would like a coffee
Waiter: Sure, what milk would you like?
Decision maker: What do you have?
Waiter: We have full cream, skim, or soy milk?
Decision maker: I'll take the full cream milk.
Value-based decision-making relies on assessing what matters most to you and then making a decision that meets your needs.
Example:

Decision maker: I would like a coffee
Waiter: Sure, what milk would you like?
Decision maker: (Considers objectives: I like a good tasting coffee, but also want to keep the fat content down because I'm watching my weight) I'll take soy milk with one serve of artificial sweetener.
Waiter: No problem.
As you can see, the decision maker in the first example listened to the alternatives presented and then selected their preference based on the options given. However, the decision maker in the second example examined their objectives and what they really wanted from a cup of coffee first, and then made a decision which met their needs.
When writing KPIs, using the alternative based approach and scrolling through industry KPI lists will leave you with your preferred KPI from that list, but achieving that KPI won't necessarily mean you've achieved your strategic objectives. On the other hand, using the value-based approach and considering your key strategic objectives first will ensure you end up with KPIs that once achieved, will mean you've also achieved your strategic objectives.
“Grow Business with SMART KPI.”