In today’s business world, it is more important than ever to set key performance indicators (KPIs) for your firm and team. Why? Because KPIs are metrics that tell you if what you’re doing is working or not! We know we need to monitor this, we even tell our clients that their numbers are important, but somehow we don’t end up measuring and monitoring our own important numbers as often as we should. To help you finally start, here’s how to set KPIs for your firm and individuals within your firm.
Why is it so important to set KPIs?
It’s all well and good setting an overall goal for your firm (I.e. in the next year, we want to grow by X%). In fact, this One Big Focus is essential to your growth strategy. What’s perhaps even more important than that, however, are the steps along the way. How do you know that you’re on the right track to achieving your goals? How do you know that you’re doing exactly what you should?
KPIs are the metrics that you need to set and monitor so that you can measure your progress towards your overall goal. They are more than just numbers that you measure and report weekly. If you choose the right ones, they will enable you to understand the performance and health of your business so that you can make impactful adjustments to your strategy.
It’s been proven that setting goals, and measuring them to see how close you are to achieving them, is a key ingredient for success. But it’s not just about setting the goal in the first place – there are certain KPIs that need to be set and monitored so you can measure your progress regularly (and reach your goal quicker!).
Mistakes to avoid when setting KPIs
Many business owners don’t know how to set KPIs effectively. Typically, they tend to make one or more of these 4 main mistakes. Avoid these when setting your KPIs for your firm and team!
Not setting KPIs for everyone
Many business owners are uncertain about how to set KPIs for their team which results in none being set or them being set half-heartedly. This is especially the case for smaller teams (I.e. the owner plus one or two others) since everyone tends to know what everyone else is doing.
Regardless of size, you need to set KPIs for each team member. This gives you a yardstick to measure your employees by and allows you to easily identify when their performance is beginning to slide. All too often, we can have a gut feeling that something isn’t right with a team member, but we don’t have the qualitative evidence to back it up. With KPIs, you can keep on top of performance and use them to have frank conversations with your team about targets and expectations.
Not measuring and monitoring KPIs
There is always a multitude of competing demands on your time and stuff does slip. Very often, it’s typically the management of your numbers that slip first. Like most business development activities, setting KPIs never seem to be high enough on the priority list so they don’t get done. Don’t make this same mistake! The benefit-cost ratio in setting and monitoring KPIs is high, so make time to do this.
Choosing KPIs that are not relevant to the firm’s plans or the individual’s influence
Another mistake that accountants make when setting KPIs is choosing numbers that don’t link up to the demands of the role or what the firm is trying to achieve. For example, giving a team member a KPI to work towards when they have very little influence or control over the KPI. Everything should lead back to your business plans for your firm, so always set KPIs in the context of what you are trying to achieve with your firm.
Setting too many KPIs
On the other end of the mistake spectrum is setting too many KPIs. When it comes to setting goals and actually making progress, less is more!
We all know that when we try to multi-task, we just end up doing multiple tasks badly, so don’t overwhelm your team. Aim for each individual to have no more than 5 KPIs on which they will be measured. Any more and their focus will be all over the place.
How to set KPIs for your firm and team
Now you know why it’s so crucial to set and monitor your numbers (and the mistakes to avoid when doing so), here is how to set KPIs for your firm and your team.
1. Decide on your KPIs (refer to your business plan)
Your KPIs need to be relevant to where you want to take your firm, so go back to your business plan. What is your firm trying to achieve? What are the key figures you need to know?
When you’ve decided on what needs to be measured and monitored, you then need to communicate this to each individual.
2. Agree on these with each individual
When deciding on your KPIs, you should have identified a set of figures for each individual. Communicate this with them and agree upon these with them. Explain how they will support the firm by achieving these KPIs.
3. Revisit and reset targets every 3 months
The small business world moves at lightning speed, not to mention the pandemic that is currently still causing havoc. This means that any targets you set now will likely be out of date within 6 months. To keep on top of change, sit down with your team every 3 months and revisit their KPIs and targets.
In this conversation, take the time to:
- Give them feedback on what they are doing well. (Any negative feedback should have been given to them at the time).
- Talk to them about how the firm is performing and their part in influencing your firm’s performance.
- Listen to what motivates them and how they are viewing their work but also the amount of work they are required to do.
- Seek out their views on what is working or not working within the firm.
- Help them decide on what is a meaningful and motivational target for them to achieve.
- Discuss what they can influence.
Start getting results from your numbers
How often are you setting and monitoring KPIs in your firm? When was the last time you spoke about KPIs with your team?
If the answers are ‘not enough’ and ‘a while ago,’ you need to start being serious about tracking and monitoring performance. The good news is, that you now know how to set KPIs. Now, you just have to get on and do it.