Article:

The cure for KPI blindness is getting back to basics

30 May 2017

Matthew Laming , National Leader, Business Services |

The end of financial year can be a trigger for businesses to focus blindly on results, without understanding how they impact on performance.

With so many ways to measure success, it’s not unusual for businesses to develop a form of KPI blindness. However, coming up with a meaningful assessment of business performance requires more than just tallying up the numbers.

Getting your business to succeed and grow requires a clear direction and understanding of your business drivers. A back to basics approach works best.

1. Commit to a plan

Business planning is something many people put off because they don’t know where to start. The core of the plan is knowledge you already have. Think about the vision you started with and if it’s still relevant. What targets do you need to reach in five years, three years, next year to meet this?
If you’re feeling stuck, open up the process. Think about how industry leaders achieve their results and how you compare. Or ask your employees for their input – this is also an effective way to empower and engage staff in the future of the business while developing new ideas.

2. Get close to your numbers

As well as a strategic plan, you’ll also need a financial plan that includes three-way forecasting (integrating profit and loss statements, cash flow forecasts and your balance sheet). This will help you consider changing circumstances and understand the relationships between your various cost and revenue drivers. This is essential if you want to identify areas to improve your business and assess opportunities as they arise.

3. Remember not all KPIs are created equal

Monthly profit and loss and management reporting is useful to understand past performance, however, the most successful businesses make informed decisions based on result drivers, not the actual result. Set KPIs that align with your strategic direction. Include lead and lag indicators as well as financial and non-financial results; and use your KPIs to identify warning signs and predict problems before they get bigger.

4. Build in accountability at all levels

A vital part of any plan is accountability. Your plans should allocate clear action items and outcomes so everyone can see a direct correlation between their actions and the overall success of the business. External advisers can help keep you on point and provide appropriate insight and advice on changes that might be required.

Likewise, it’s important to act on these results. Support staff to achieve their goals; and act on non-performance where necessary. Holding yourself and your team regularly accountable will go a long way to help you meet your business goals.

Don’t wait for a date on the calendar to think about where you want your business to be and how you’re going to get there. When you have the right plans and tools for business planning and financial reporting, it is easier to keep your operations and strategy on track.

If you have questions about business planning or how to access the information, intelligence and insights you need to thrive, get in touch with me or a member for the BDODrive team today.