Ep #79: How to Create Key Performance Indicators

 In Podcast

Key Performance Indicators (KPI) are the vital signs for your business. They are diagnostic in nature and can be used to help determine if there’s a problem with the health of the overall business or with specific roles within that business.

What you’ll find in this episode:

  1. The reason we ask, “what role do I need to fill?” versus “what type of person do I need?”
  2. The steps toward creating key performance indicators
  3. Why people struggle with KPIs for administrative roles
  4. Your job as CEO when it comes to employees and KPIs

Featured on the Show and Other Notes:

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Podcast Transcript

Hey, I’m Kris Plachy host of the Lead Your Team podcast. Running a million dollar business is not easy and whether you’re just getting started with building your team, or you’ve been at this for a while, I’m going to bring you honest, specific, and clear practices you can use, right now, today to improve how well you lead your team. Let’s go ahead and get started.

Hey, Hey, how are you? Welcome. Welcome. I am super excited to be talking with you today. I’m actually going to do a pretty tactical podcast today because we’ve had a lot of this discussion just happening in the lab. It’s something that I know is critical to your success as the CEO of your business and it’s also something that I think feels pretty elusive sometimes. So, yay. We’re going to talk about key performance indicators, or KPM, key performance measures, or OKRs, some people call them. So you can call them whatever you want. What they are, are those vital measures that you need to evaluate and assess in your business in order to know how well your business is tracking. Right?

So, first of all, thanks for joining me. I’m Kris Plachy. If you haven’t listened before, I’m so glad that you’re here. And, here in the podcast, we talk about all things related to being a female entrepreneur, having your own business and really negotiating the team element of the business. I know there’s a lot of different people out there who can help you with a lot of different things about what you do and what you need to know how to do as somebody who’s operating a business. I focus very, very intensely on the team, how to maximize and get the results that you need from the team and sort of get over yourself. Somebody who probably doesn’t necessarily love managing people and that’s okay also.

So KPI is a critical element to the longevity of the success of a role and the success of your business. If we can’t really measure something, we don’t really know how well someone’s doing. And when we first start our business, it’s very common for performance to be an opinion, which if you’ve been a long-time listener, you know I talk about that a lot. We don’t want performance to be an opinion, because then it’s just based on how you feel. If you like someone, or if they don’t like you or how you feel that day, and you get way too accustomed to using your own judgment. And while I’m sure you’re very smart and very capable, sometimes your judgment’s a little off because we have lots of thoughts that influence the way that we think.

So the math of a position, the math of how we hire people, right, is we look at the business, we look at the need of the business and we make an assessment about what is the need and then what is the type of role I need for the business? We don’t ask ourselves, “what is the type of person I want to hire?” We look at the role. What is the function I need accomplished in my business, right? So I assess that. I write out that job description and that’s part of what I teach my clients is how to write a job description so that you can then actually really know what the KPI are.

Okay? So we write out that job description and one of the core things we always have to figure out are the objectives of that role. Like, what is it that the reason that role exists and what are we paying this role to achieve? Remember that we hire people to fill roles and we have roles in our business to achieve results, right? It’s that simple. That’s why we hire people. So I’ve now got this role and I want to figure out, okay, how am I going to know if this role is thriving, if this role is doing what I want it to do, it’s achieving that ultimate result that I want achieved?

So that’s where KPI come in and KPI are what… Another way that I talk about this all the time that I heard years ago from my coach, Vicky Merrill. We’re going back to like 2003. But years ago, Vicky talked to me and taught me that KPI in a business are like the vital signs of a body. So if you and I ended up in the hospital and we were in a unconscious state, they would immediately… The medical professionals would assess our vital signs, right? They would take our blood pressure, our heart rate, our body temperature. They might do some brain activity. They might do some… I’m missing one. I got heart rate, blood pressure. Well, you get the drill, right? And so they assess that very quickly to sort of do a quick overview of, “Okay, how is the body doing?” And those measures then become diagnostic to determine if there’s a problem. If there’s something else that needs to be investigated, right?

So a business is the same thing. A business needs to have KPI or vital signs, right? A business has to have those measures that tell you if the business is thriving or if the business is unhealthy. So we have to have those as CEOs for our overall business. And most businesses, like every business has its own variation, but we’re talking about revenue, profit. It could be retention of clients or customers. It could be attraction of, or engagement of new clients or customers. Sometimes we have compliance because if you work in a very regulated industry, compliance is something that if you don’t do right, it will shut you down. And that’s kind of another way to think about vital signs or KPI. If it doesn’t, if it’s not thriving, it will shut you down. Right? If a heart stops, it shuts the body down. If the body temperature goes way too high or way too low, the body starts to shut down.

So we have those same measures in our business. What are they for you? And then, what are they for each role? Okay? And we’re not talking about 12 things. We’re talking about three to five at the most. And the same is true for you in the dashboard that you look out for your business, right? But as we talked about over the last couple weeks, there’s that transition of going from solopreneur to entrepreneur, to CEO. And you keep little bits of that as you go along. But, typically speaking, a solopreneur just knows how much money came in like yesterday and they typically assess the performance of their business by what’s in their bank account. Right? Entrepreneurs start to build these systems and you start to have more evaluation of what you do. But I will tell you, I work with a lot of women who are running two and three and $4 million businesses. They don’t have robust key performance indicators.

And it’s okay. Like that’s part of why you hire someone like me is to help you figure that out. Right? And then we get to CEO. Now I want you to really have your robust KPIs, not just for the business, but for every role in your company. Now, some positions, KPIs are easier to create. They’re just very obvious, like a sales position. That’s pretty obvious, right? Anything that has to do with a percentage, a number, a dollar amount that usually is very simple to track.

Where people struggle are administrative roles, because they don’t feel as quantitative, but they can be, and you can actually make qualitative data quantitative. And honestly, this is also part of what I work with my clients on. How do you measure the KPI of a front desk person in a medical office? How do you measure the KPI of a project manager? What should the KPI be for a systems analyst? Right? Everybody has different roles in their business. I totally… Or customer service even, right. And when you’re smaller, you don’t have a lot of the measures. Big companies use robust surveys and all these things to assess people’s skill or impact on the business. When you’re smaller, you don’t have that. So what we do is we look at the job description and we really assess, okay, what are those core responsibilities and core outcomes that we expect of the role? And then we translate those into what hopefully eventually become transparent KPIs that both you and your employee know about. And that becomes part of the ongoing performance management, coaching, discussions that you have with people on a regular basis.

So I wanted to do a quick one here because I know this can feel daunting. It’s just like yesterday, I helped about three of my clients with their titles, their CEO job descriptions, which everybody wants to punch themselves in the face when they have to write a job description, especially their own. So I really do have a lot of respect for that. However, it’s through that process that you get really clear about what you want to hold other people accountable to. And once you know what you want to hold people accountable to, and you have that shared and communicated, it makes performance management and dealing with things that aren’t going well… It makes everything so much easier. And you don’t have to feel this angst every time something doesn’t go right because you’re not just leveraging your thoughts and your judgment. You’ve actually built a business that has expectations that you’ve communicated that other people have to deliver on.

It’s lovely. It’s heaven. Frankly, it’s magic because in my opinion, most adults want to do well. Most adults want to succeed. So if we go with that, because I like believing that, then what we have to do as CEOs is create that path and make that obvious to them. Right? Make it clear this is how you win. This is how you succeed. Yeah? So I want you to take some time today and look at one position in your business and just decide, “Okay, have I done a job description? I’ve done a podcast on writing job descriptions. Go back and listen to that if you need to. But have I done that? And then what are the core areas that this role is responsible for? And how would I know that they did it?” Right?

And you can do the same thing for your business. What are the core vital signs of my business? And how do I know that we’re tracking? Right? And this is honestly the work I do with my clients. I know it can sound, again, overwhelming. It really isn’t when we break it all down and then you’ll know at any given time how you’re tracking, how you’re performing, how your team is performing and, best yet, they’ll know. So it’s not just you knowing, it’s creating a transparent performance process so that other people know how to guide and take ownership for their own success. Right?

So I’m getting ready to launch a new program. It’s going to be a live course called How to CEO. I really want to invite you to join. I have a wait list right now. So if you just go to howtoceolive.com, you can put your name in there. We will be sending out information and giving people on the wait list priority to get into the class. Again, this will be a live course that I’m teaching and we’re going to provide coaching support while you’re in the course. So I’m so excited to teach this. I haven’t taught a live course in quite some time so I’m really looking forward to that experience with you. But I’m also really looking forward to helping everyone who is a woman who has a company, and you sort of wrangle with this, “What am I supposed to be doing as a CEO? What am I supposed to be doing?” Let’s figure that out together. I’ve got some great insights and great tools for you. So make sure you go ahead and join that wait list. Thanks for tuning in today. Work on your KPI and I’ll see you and talk to you next time.

Hey there gorgeous. Are you ready to take everything I teach you in this podcast and put it to work in your business and really learn how to master leading your team? If so, I’d love to have you as a client in the Founders Lab. To learn more about how we can work together, head on over to krisplachy.com/join. There you’ll see everything you need to know about the Founders Lab and how to get started. See you there.

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