KPI Overload

It’s that time of year…  There’s so much going on and it’s becoming difficult for you to stop and breathe.
too many KPIs

Kids are finishing up school, which entails end-of-year parties, standardized testing, and projects. Businesses are pushing to boost sales as the end of the second quarter quickly approaches. Summer vacations are being set. You may feel a little bit overwhelmed!

Information & KPI Overload

How are you measuring your performance and productivity?

It’s easy to get caught up in thinking that monitoring as many indicators as humanly possible is the best way to boost your performance. Multitasking, exhausting yourself, and spreading yourself too thin are not helpful when analyzing your performance.

The same goes with business… We often see that our clients have 8-10 KPIs (key performance indicators) per department to measure productivity.  Assuming the average company has 6-10 departments, that means you’re tracking up to 100 KPIs!

How can 100 KEY Performance Indicators be useful?

Performance Indicatorstoo many KPIs

When organizations have so many “KPIs,” we find that they become PIs (or performance indicators). These PIs are useful for when you’re in the nitty gritty of a specific department as it measures the success (or failure) to meet goals in that department.

As a financial leader, it’s important to categorize which indicators are key and which are just to measure specific performance.

For example, a person who doesn’t differentiate KPIs and PIs might pitch that the company is doing well because it’s decreased the amount of time packing the inventory for shipping to customers by 15%. How does that correlate to sales and your net profit?

(NOTE: Need help finding your company’s KPIs? Check out our KPI Discovery Cheatsheet!)

Too Many KPIs

Having too many KPIs can result in what I call  KPI overload. So many organizations think that by having 8-10 KPIs per department, they will be better able to assess the performance of the company. WRONG.

(K.I.S.S. Keep it simple, stupid!)

Truth is: when you have 100 KPIs, no one has the time or energy to look at every one of them. All of the sudden, those KPIs become redundant to the company. There’s a lot of reading in between the lines to understand what the KPIs are measuring.  Not to mention the wasted time preparing the measures that are most likely being ignored…

Difference Between KPI & PI

By performing an analysis of the most important business activities that drive profits and cash flow, you can then develop a set of true key performance indicators. Look for the 6-8 numbers that really drive the bottom line.

If you need more numbers than the 6-8 KPIs to analyze productivity, they aren’t necessarily KPIs. These PIs can be used for quality control, etc. A department might need to use a PI to manage their procedures; the key difference is that it doesn’t “move the needle”.

What is Key?

First, figure out what your CEO wants to know. As a financial leader, it’s imperative for you to act as a wingman to the CEO. You may have 100 indicators that you could give to your CEO… BUT do they have the time and knowledge to assess the general performance?

Give them the 40,000 foot view of the companies performance by providing 6-10 KPIs for your organization, regardless of the size of the company. Without this 40,000 foot view, it becomes difficult to discern what is key.

(How do you use flash reports to improve productivity? Check it out here now!)

Once you have identified some KPIs, it’s time to track them. Track KPIs and analyze variances. Then you may use trend tools, what-if scenarios, and breakeven analyses. Evaluate what is important.

For example, as you build a dynamic cash flow projection (one of the many trend tools you can create after identifying your KPIs), you’ll be able to key in assumptions that drive revenue and manage the cost of goods sold. By adjusting those numbers, you’ll be able to see what is sensitive.

Download our free KPI Discovery Cheatsheet and start tracking your KPIs today!
too many KPIs, KPI Overload
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too many KPIs, KPI Overload

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One Response to KPI Overload

  1. Ned Armstrong April 29, 2016 at 3:53 pm #

    Well stated. Too many KPIs leads to paralysis by analysis. The KISS principle is certainly appropriate to this topic. I would also suggest that KPIs be separated into those that reflect industry performance and those that reflect company-specific performance. Attainment of each should be evaluated in the applicable light.

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