NOTE TO FACILITATOR: This is an educational slide.
These are some basic definitions of the kinds of metrics we’ll work on in this deck.
Targets are future goals that you’re setting and will be striving for some period of time to achieve. These are often longer-term and sometimes strategic in nature. Examples: Annual Revenue, EBITDA, Total # of Customers/Stores/Locations.
Critical Numbers are special metrics designed to drive a company priority that will be highlighted for a short period of time for the purpose of improving a specific area of the company. Examples: # qualified leads generated by a new marketing program, Average $ sale during a sales promotion, # new hires during a high recruitment time, could be any of your KPIs or something entirely new.
KPIs are Key Performance Indicators that will measure the on-going health of your company over time. These can be measured daily, weekly, or monthly, and will often reveal important patterns in your business. Examples: On-time Delivery, Client Health Index, Net Promoter Score, Quality, AR days.
Please have the team read this blog as pre-work before you being working on metrics: http://www.rhythmsystems.com/blog/bid/142922/Making-the-Most-of-Your-Metrics
NOTE TO FACILITATOR: This is an educational slide.
Before working on KPIs with your team, make sure everyone is clear on the difference between a KPI and a Priority.
Here’s a blog with more information that the team can read ahead of time: http://www.rhythmsystems.com/blog/bid/151710/Know-the-Difference-Between-Priorities-and-KPIs
NOTE TO FACILITATOR: This is an educational slide.
This terminology is used throughout the deck, so please ensure that the team understands what terms mean.
Leading indicators are the KPIs that can give you some insight as to what is about to happen. They are predictive and future focused. Accountability to the right leading indicators with clear success criteria will drive performance. (Rhythm, p. 159)
You don’t need leading indicators instead of results indicators. You need both. We’ll talk more about how to create Leading and Lagging Indicators later in the deck.
For a better understanding of Leading Indicators, refer to Chapter 8 in the book Rhythm and to Rhythm University.
NOTE TO FACILITATOR: This is an educational slide.
These targets are usually determined during your planning sessions. They may be from your budget or targets that you have to hit from your board or for your shareholders.
Targets are future goals that you’re setting and will be striving for some period of time to achieve. These are often longer-term and sometimes strategic in nature.
(To work on setting Targets, use our Quarterly or Annual Planning slides in your next session. You can download them from Rhythm University.)
NOTE TO FACILITATOR: This is an example slide.
These are some examples of the types of metrics you may choose as Targets for your year or quarter:
Revenue
Gross Margin
EBITDA
Rev./Emp.
A/R Days
Inv. Days
# of Locations
# of Customers
NOTE TO FACILITATOR: This is an educational slide
*Your critical number may be a key financial, such as revenue or revenue growth, retention, a key activity, etc.
* Your team will determine Critical Numbers during your Annual and Quarterly Planning sessions.
Learn more about Critical Numbers here in Rhythm University: http://university.rhythmsystems.com/index.php/critical-numbers
NOTE TO FACILITATOR: This is an educational slide
We recommend having one critical number related to process and one related to people to counterbalance each other so you do not focus too heavily on one area at the expense of the other. So, if your Critical #1 is people-related, your Critical #2 should be process-related and vice versa:
People KPIs are in these categories: Employees, Customers, Shareholders
Process KPIs are in these categories: Make/Buy/Deliver, Sell, Recordkeeping
NOTE TO FACILITATOR: This is an example slide.
In their planning session, Team X decided that their theme for the Quarter is “Explode Growth.” To support that theme, they decided their Critical #1 needed to be New Sales Revenue.
They set RYG criteria by determining their goal (Green = 1.1m), their Stretch Goal (SuperGreen = 1.3 m) and the level of unacceptable performance (Red=.9m)
Then, they asked – What might we overlook or what would suffer if we were overly focused on increasing New Sales?
To help them arrive at the counterbalancing Critical #2, they also considered that Revenue is a process KPI, so they wanted to consider People KPIs for their Critical #2.
They came up with Client Retention as the most important thing that could suffer from being overly focused on new sales. That is their Critical #2.
NOTE TO FACILITATOR: This is an educational slide.
KPIs can be measured daily, weekly, monthly, quarterly, and will often reveal important patterns in your business.
See our KPI Guide for more information about Key Performance Indicators: http://university.rhythmsystems.com/images/Resources/GUIDE_KPIs.pdf
NOTE TO FACILITATOR: This slide is intended for the executive team or group leaders.
LEAD DISCUSSION:
Ask: Are we talking about the right things at our Weekly Meetings?
If you went on vacation, what are the top numbers that you would want to get in your email to know the health of the business while you were gone?
Is there a specific problem we need to solve? (revenue, retention, etc.)
-Do we have KPIs to measure our Critical Numbers?
- If you have no KPIs established at all, start by adding just your Critical Numbers for the quarter and a Quarterly Revenue KPI.
Usually no more than 8-12 KPIs total. Stay focused.
Add new KPIs here: https://rhythm.rhythmsystems.com/#CompanyKpiPlace:;seg=1;tab=5
Refer to Chapter 8: The Power of Leading Indicators and Dashboards
NOTE TO FACILITATOR: This is an Example slide.
These KPI examples are broken into the 6 categories on the Scorecard view in Rhythm. You can assign your KPIs to a category so that they appear on this scorecard view.
LEAD DISCUSSION:
Ask: What will we consider success and failure for each KPI?
What is the stretch goal for each (SuperGreen)?
Will the Red-Yellow-Green® Success Criteria be a weekly, monthly or quarterly number?
If your KPI is Yellow or Red, have a Plan B so that you can take action to get back on track.
For help setting Red-Yellow-Green® success criteria, refer to Rhythm® University: http://university.rhythmsystems.com/index.php/success-criteria
LEAD DISCUSSION:
Ask: How will we gather the data for each KPI?
-Where will the numbers come from?
Will the Red-Yellow-Green® Success Criteria be a weekly, monthly or quarterly number?
What’s the deadline for all of the data to be in Rhythm each week?
Blog for reference: http://www.rhythmsystems.com/blog/bid/157381/KPIs-We-Know-WHAT-to-Measure-Now-HOW-Do-We-Measure-It
NOTE TO FACILITATOR: This is an exercise slide
Enter your KPIs here in Rhythm: https://rhythm.rhythmsystems.com/#CompanyKpiPlace:;seg=1;tab=5
Once you enter your KPIs from the steps above in Rhythm, test them out for a few weeks or a month to make sure you are measuring the right things. Then, come back to this deck and continue with the next slides.
LEAD DISCUSSION:
Ask: Are we talking about the right things at our Weekly Meetings?
Did we have any blindspots in the previous quarter?
Is there a specific problem we need to solve? (revenue, retention, etc.)
Do we have a good mix of leading and lagging indicators?
Leading indicators GUIDE you. They give you a glimpse into the future and help you see where you need to make adjustments.
Lagging indicators REPORT the results. They let you know where you ended up. They are driven by your leading indicators.
Do we have KPIs to measure our Critical Numbers?
Usually no more than 8-12 KPIs total. Stay focused.
Add new KPIs here: https://rhythm.rhythmsystems.com/#CompanyKpiPlace:;seg=1;tab=5
Refer to Chapter 8: The Power of Leading Indicators and Dashboards
NOTE TO FACILITATOR: This is an exercise slide.
A leading indicator has 2 characteristics:
It is measurable.
You can influence and move it.
Leading indicators are the KPIs that can give you some insight as to what is about to happen. They are predictive and future focused. Accountability to the right leading indicators with clear success criteria will drive performance. (Rhythm, p. 159)
You don’t need leading indicators instead of results indicators. You need both.
Use the example in the next slide to help you find leading indicators for your results indicators that you’ve already identified.
You also can use the Leading Indicator tool in Rhythm University to walk through this process: http://university.rhythmsystems.com/images/Resources/LeadingIndicatorCreatorED.pdf
NOTE TO FACILITATOR: This is an example slide.
1. Determine the result you want to achieve (your lagging indicator)
2. Dig deeper with questions to determine how to get the result you want.
3. Find the leading indicator to drive the results you want.
For more about Leading Indicators, see p. 159-161 in Rhythm.
LEAD DISCUSSION:
Rhythm® Link: https://rhythm.rhythmsystems.com/#CompanyKpiPlace:;seg=1;tab=5
Ask: Do we have the right list of KPIs in Rhythm®?
Are we talking about the right things at our weekly meetings?
Do will still find all of them helpful and worth keeping? (Tip: If it does not prompt an action when it goes Yellow/Red or provide a needed insight, delete it.)
Delete any KPI that is no longer needed. (Note: This does not delete the KPI in historical quarters. It only removes it from the current quarter.)
Usually, no more than 10-12 KPIs total. Stay focused.
NOTE TO FACILITATOR: Review these pitfalls with your team once you have your KPI set so you can avoid them.
NOTE TO FACILITATOR: Working on your KPIs is a journey rather than an event. Determining your KPIs is an iterative process, and you should revisit your KPI set every quarter to refine and improve it.
Contact your coach if you need help with your KPIs.