KPIs are more than just numbers that are reported regularly. They measure and track progress towards achieving a specific goal. They allow any organization to understand the performance and health of the overall business so that critical adjustments can be made to achieve the company’s strategic goals.
Deciding on KPIs can be tricky, as this process comes with plenty of challenges and hidden traps. Many businesses are unsure of how many KPIs they should have and which ones should be chosen.
This begs the question: is there a ‘golden number’ of KPIs? How many should you have to build a successful KPI strategy? Let’s find out.
How Many KPIs Does a Company Need?
Less is more, especially when it comes to KPIs. Instead of choosing dozens of metrics to measure and report on, it is recommended to focus on just a few vital ones. Tracking too many KPIs often results in getting overwhelmed with data and losing focus.
Every industry, organization, and even department within it is different. It is difficult to pinpoint the exact number of KPIs a business should have.
The ‘golden’ number? Bernie Smith, Founder of Made to Measure KPIs, recommends aiming between two and four KPIs per goal. Doing so will allow a company to get a sense of its current situation and also work on its priorities.
Determining Goals and KPIs
Before choosing KPIs, every company should settle down on its three important goals. The Franklin Covey Institute calls them WIGs (Wildly Important Goals). You can check this overview of their 4 Disciplines of Execution to learn more.
It is recommended that an organization settles down on three WIGs – the three most important goals in the beginning. Once those are accomplished, a company can move on to the other priorities and measure different things.
As already mentioned, the aim is to have two to four KPIs per goal. Some goals will need only one KPI; others will have four. However, exceeding four KPIs is not recommended.
But, the question remains – how to choose the right KPIs? And, how to settle for only four?
The ROKS® approach for KPIs
The ROKS® approach is a tried-and-tested seven-step process for developing KPIs. It entails determining the primary outcomes of an organization, breaking those goals down into two levels of detail, and then determining the KPIs associated with those objectives.
With the ROKS® approach, it is possible to identify only the relevant KPIs directly related to the strategy and derive measurement criteria that ensure the success of your company. So it’s a top-bottom approach (management to employees).
You can learn all there is to know about ROKS® here.
At HICO-Group we implement industry-leading best practices in KPI identification, implementation, and management to help you drive measurable performance improvements for your business.
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