Common Pitfalls with Setting KPIs

As we reach the deadline for setting your annual KPIs, goals and objectives, here are a review of the common mistakes.

1. The goals are too general or generic
I have seen this in the KPIs recently.  “To improve customer service in the department”.  This is too general.  How do we know you have achieve it?  I once heard a famous speaker said that “if your target is anything, you will hit it every time!”.  So when you said you wanted to improve customer service, are you referring to internal or external customers, are you doing an independent survey, NPS score, or conducted internally? And how do we set the baseline, is it an arbitrary score, based on national average, or we just need to get a survey out so that you get your boss off your back. And since it is our first year, let’s just set it ridiculously low, like 2 out of 5 to be safe.  

2. Measuring activities that are easy to measure
If you are new to KPIs or goal setting, it can be a little overwhelming to get started.  Some things are easy to measure, like sales, profit or stock turnovers or stock levels.  But if your job involves more intangible or subjective work, it gets challenging.  For example, your job is Learning and Development.  The easiest things to measure is which month I will complete my training plan for 2019.  But is it a relevant measurement in terms of adding value to the organization? Sure getting the training plans ready is important, but how about executing your plans?

3.   The goals are achievable and attainable
When we set goals, there are many factors driving it.  It could be you needing to please your boss, OR it could be you wish to stand out, therefore an ambitious goal will help you get notice by your boss.  Whatever the reason, the goals can be impossible to achieve.  For example, you want to improve your Days Sales Outstanding (DSO) by 20% this year, is it achievable?  Have you done a close review on the challenges and what has prevented it from being successful in the past?  An unachievable goals can have detrimental effect on you as well as on your team. You either give up early, not bother to try, or the goals set have no bearing on discretionary efforts whatsoever.

4. Set a nice goal but it does not relate to corporate objectives
You have decided that a worthwhile goal to set is sell your product in every state in the country this year.  However, there’s only 2 of you, and because it is a new business, budget is limited.   Your organization strategy is to focus in the main metropolitan area so that customers can be adequately support and also where most of the business opportunities will be. In another words, it is not relevant to the overall corporate objective.

5. Set a goal without any time sensitive deadline
This can range from goals statement that is very general – “Improve customer service”, “Increase efficiency in our billing process”, “Enhance communication among the team”.  There are 2 things that we are able to improve here.
Firstly, add more specific details in the statement. Example: Increase the turnaround time for “Order to Invoicing” by 25% (from 4 days down to 3 days).
Secondly, add a timeline to the goal statement. Example: Increase the turnaround time for “Order to Invoicing” by 25% by June 2019

If you have been alert, you will realised that I have just outlined the famous SMART goals principle. Sure it is ubiquitous when it comes to goal setting, the reason I have mentioned it is because it is not commonly applied! Go back and check your goals, do they PASSED the SMART test?

Till next time…

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