Most people know about Key Performance Indicators (KPI's), but what is a 'Critical Driver'?
The problem is that most people are so caught up with bottom line retrospective KPI's, such as quaterly Sales revenue that they miss the 'Critical Drivers' (or prospective KPI's).
A useful analogy to use when differentiating these terms is to ask yourself, "Do I want to know why someone died 90 days after onset of illness, or would it be useful to find out on day 1 that their vital signs, Critical Drivers of life such as Heart rate and Blood Pressure, are trending towards unhealthy levels, so I have time to help them survive before its too late. Now hopefully your business wont die in 90 days if your last quater results were breakeven or above, but why not focus on daily improvement of the steps that lead to sales, like conversion rate and number of qualified prospects met, as the critical driver to look to for lifting the final KPI.
The more often critical drivers are looked at the better the chance for improvement. The more often the leader looks at the Critical Drivers, the more often the team will look at them. If your team know you take these figures seriously by constantly reviewing them without getting distracted away by new ideas every month then they too will sustain their focus on them.
Another example is employee performance review cycles. If you sit down with an employee today and ask them to improve in an area without reviewing it again with them for another 365 days, who do you have to blame for the opportunity cost of a year without improvement? You could try to blame them for not following your advice but how can they deem it important if you are only prepared to spend a couple of minutes per year discussing it.
Monday, August 10, 2009
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