1/31/2020 How to Write KPIs - 4 Step Approach

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How to Write KPIs - 4 Step Approach

by Maddy Mirkovic, on Jun 5, 2019 8:38:00 AM

Questions about KPIs are frequently heard here at Cascade, whether that be from one of
our 6000+ users or 60,000+ subscribers. We noticed a lot of people struggling to nd
examples on the web that were the right t for their needs. So we thought we'd put
together our own 4 step approach to writing great KPIs, and share it with you. This article
will walk you through our 4 simple steps to writing great KPIs as well as answer a few
commonly asked questions about KPIs, such as KPI meaning, how many KPIs should
you have, and what are they used for in a business.

KPI Meaning

KPI stands for Key Performance Indicator...but what does key performance indicator
mean? Well, the KPI de nition that we use is, a measurable value that shows the
organization's progress towards achieving key business objectives. Organizations can
use Key Performance Indicators as a way to track whether their key business objectives
are on track, behind, ahead, or have been achieved. 

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Writing KPIs - The 4 Step Approach

Possessing knowledge on how to write KPIs is extremely valuable for any business
professional. So, if you need a hand to get going, follow our 4 step approach to writing
KPIs:

1. Determine strategic objectives

2. De ne success
3. Decide on measurement
4. Write your SMART KPIs

NOTE: At this point, I should mention that when I use the term 'strategic objectives' in
this article, I'm referring to the purpose of your actions. While some may argue that this
should be called a goal or an initiative rather than an objective, I would argue that the
terminology is not as important as the concepts they represent. As long as the concept
behind each term is well understood in your organization, there is no reason to change
your terminology (even if your terminology doesn't match that of our post - as long as
the concepts do).

How to Write KPIs – 4 Step Approach

Download your KPI Report Template here!

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1/31/2020 How to Write KPIs - 4 Step Approach

Download the KPI Report Template

The template is 100% free and comes in Excel format allowing you to create
beautiful KPI reports and dashboards for your organization.

DOWNLOAD TEMPLATE

Tip: Don't copy your KPIs straight from someone else's list!

While there's a wealth of KPI examples available online - scrolling through industry lists,
picking out a KPI and attempting to force it into your strategy won't do you any favors.

Why?

Well, KPIs should be developed to contribute to achieving a speci c strategic objective. If

they're not developed with a speci c strategic objective in mind, they run the risk of
stealing attention, time, and money from KPIs that actually help to achieve strategic
objectives. The best KPIs for YOUR business are designed by starting with YOUR speci c
business objectives. Now, this is not to say all the content available on KPI examples is
useless, because it's de nitely not - it's actually an important resource. But, looking
through KPI examples shouldn't begin till AFTER you have determined your own key
strategic objectives.

Alternative vs Value-Based Decision-Making

To get a better understanding of why you should always start the KPI process by having
rst de ned strategic objectives, consider the two potential ways of deriving your KPIs:

 Alternative-based decision-making
 Value-based decision-making

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Alternative-based decision-making relies on choosing your preferred option from the

alternatives offered.

Example:

Decision maker: I would like a coffee

Waiter: Sure, what milk would you like?

Decision maker: What do you have?

Waiter: We have full cream, skim, or soy milk?

Decision maker: I'll take the full cream milk.

Value-based decision-making relies on assessing what matters most to you and then
making a decision that meets your needs.

Example:

Decision maker: I would like a coffee

Waiter: Sure, what milk would you like?

Decision maker: (Considers objectives: I like a good tasting coffee, but also want to keep
the fat content down because I'm watching my weight) I'll take soy milk with one serve
of arti cial sweetener.

Waiter: No problem.

As you can see, the decision maker in the rst example listened to the alternatives
presented and then selected their preference based on the options given. However, the

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decision maker in the second example examined their objectives and what they really
wanted from a cup of coffee rst, and then made a decision which met their needs.

When writing KPIs, using the alternative based approach and scrolling through industry
KPI lists will leave you with your preferred KPI from that list, but achieving that KPI won't
necessarily mean you've achieved your strategic objectives. On the other hand, using the
value-based approach and considering your key strategic objectives rst will ensure you
end up with KPIs that once achieved, will mean you've also achieved your strategic
objectives.

How to Write KPIs - 4 Step Approach

Your organization's business model, industry, and even the department in which you
operate will have an impact on the type of KPI you need. Luckily, we've devised a best
practice process for how to write KPIs that will allow you to create the perfect KPIs every
time.

Step 1 - Determine the Key Strategic Objectives

Before writing KPIs, you'll rst need to determine which of your organization's strategic
objectives you're trying to gauge. If you've been following along our mini series "How To
Write A Strategic Plan: The Cascade Model' then you will have already de ned some
strategic objectives for your organization, and you're ready to create some KPIs.

If you haven't de ned any strategic objectives (or goal) for your organization yet, check
out this article rst and then jump back over here to create your KPIs.

E.g. Strategic Objective: Increase the ow of the marketing pipeline.

Step 2 - De ne Success

Now that you've identi ed your strategic objectives, you'll need to begin thinking about
what the success of each objective looks like. Sticking with the same example used in

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Step 1, if my objective is to increase the ow of the marketing pipeline, the success of

this objective means increasing the number of contacts that enter the pipeline, and
increasing the number of contacts that pass through the end of the pipeline and get
handed over to Sales. By rst de ning what success looks like, deciding how you will
measure the success of your objective becomes a lot easier.

When de ning the success of your KPI, you will usually nd there are multiple parts to
the de nition of your objectives success. In the example used above, we found there
were two parts to achieving success of our objective -

1. Increasing the number of contacts that enter the pipeline.

2. Increasing the number of contacts that pass through the end of the pipeline and
get handed over to Sales.

As mentioned earlier, this is the time when it might be useful to look through a few KPI
examples to help get some inspiration for how you can de ne the success of your key
business objectives. Again, you should avoid copying KPIs straight from a list, as,
chances are, they won't perfectly t your strategic objectives. Instead, use the KPI
examples as a way to ideate how you can measure the success of your own strategic
objectives.

We've collated a whole bunch of KPI examples already and grouped them by the
department to help give you a little inspiration:

1. Sales KPIs
2. Marketing KPIs
3. Financial KPIs
4. HR KPIs
5. Customer Service KPIs
6. Health & Safety KPIs
7. IT KPIs
8. Change Management KPIs

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Step 3 - Decide on measurement

Next, you'll need to decide how you will actually measure success. Going back to our
example once again, we've identi ed that the success of our objective means increasing
the number of contacts that enter our pipeline AND increasing the number of contacts
that pass through the end of our pipeline

Let's start with the rst part of this - Increasing the number of contacts that enter our
pipeline. Contacts enter our marketing pipeline when they subscribe to our mailing list or
exchange their details for content for the rst time. When contacts engage in either
activity, they automatically get added to our marketing automation platform as a
subscriber. Using the number of new subscribers added to our marketing automation
platform over a time period is an easy way for us to measure the number of contacts
entering our marketing pipeline.

Now let's look at the second part - Increasing the number of contacts that pass through
the end of our marketing pipeline. Contacts pass through the end of the marketing
pipeline when they're ready to be handed over to our Sales Team. We use the term "SQL"
(Sales Quali ed Lead) to de ne a lead that has moved through the end of our marketing
pipeline and is ready for our Sales Team to pick up. Our marketing automation platform
adds a tag on each contact pro le to identify which life-cycle stage they are in based on
certain activity. Again, through our marketing automation software, we can use the
number of contacts who become a SQL in a given time period to measure our success.

This is where it might be wise to start considering dashboard software to track and
display your KPIs. You'll likely use various platforms and tools across your business to
measure your KPIs, but having a central location to track and view all your departmental
and organizational KPIs will ensure you have a clear view of your success. Cascade's
Dashboard tool is extremely powerful and allows you to pull data from all around your
business, so you can display your most important information, real time, to whoever in
your organization needs it.

Step 4 - Write your KPIs

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Finally, it's time to begin actually writing your KPIs. KPIs should follow the SMART format
(speci c, measurable, attainable, relevant, and time-bound), to ensure your KPIs meet
this criterion, we've devised a formula that you can follow to ensure you end up with
SMART KPIs every time. The main advice here is to keep things simple. KPIs should be
understood by everyone within the organization. That means no jargon (if possible), and
keeping them to one sentence long.

We suggest a structure as follows:

Action Detail Value Unit Deadline

Putting it all together, our KPIs may look something like this:

Example 1

Increase new HubSpot lead pro les to 40,000 people by 31st December 2019

Example 2

Increase new SQL pro les to 20,000 people by 31st December 2019

Starting off with a verb forces you to be speci c about what you’re trying to do. A metric
and unit ensure your KPI is measurable and a deadline will do wonders for staying timely
on your progress.

Cascade does a great job helping write KPIs this way with it's goal designer (See
screenshot below)

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How Are KPIs Used in an Organization?

Key performance indicators are a communication tool for organizations. They inform
business leaders of their organization's progress towards reaching key business
objectives. KPIs are able to provide this information because they actually track the most
important performance measures, which can be taken together to represent how
successful you are in achieving an objective. This information channel is extremely
valuable as, in a well-designed strategy, an organization's key business objectives should
have a direct impact on the organization's overall performance. Therefore, KPIs will
communicate whether your activities are achieving, for example, business growth at the
rate expected or not, and how much growth you've actually achieved.

KPIs also assist in identifying issues with organizational processes. If the progress on an
objective falls behind, the key performance indicator associated with it will communicate
this to business leaders as soon as the trend begins to show itself (assuming you have
leading & lagging KPIs). The organization will know that something has gone wrong and
an investigation is required. A strategy to mitigate the issue can then be created and
implemented before it has far-reaching effects on the organization's performance.
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How Many Key Performance Indicators Do You Need?

The question of how many key performance indicators you need will vary with every
company. However, we do have a framework which you can apply to help you assess
how many KPIs you'll need to implement for your organization. The number you need will
depend on how many key business objectives you have in your organization. As a rule,
we generally say you should have 2-3 KPIs per objective, to ensure a variety of measures
without overwhelming the picture. The reason we use a minimum of 2 KPIs as a rule, is
because we believe each business objective should have at least 1 leading indicator and
1 lagging indicator. This allows you to predict future performance as well as record the
actual performance and compare these to the direction of your business objective.

What Are Leading and Lagging KPIs

Leading and lagging KPIs are often mentioned when it comes to strategy, but what is the
difference between the two? A leading KPI indicator is a measurable factor that changes
before the company starts to follow a particular pattern or trend.Leading KPIs are used
to predict changes in the company and future performance, but as predictors, they
cannot always accurately forecast the future. On the other hand, a lagging KPI is a
measurable fact that records the actual performance of an organization.

Leading key performance indicators are often easier to in uence than lagging KPIs,
however, generally measuring them can prove more di cult. Lagging KPIs, on the other
hand, are usually easier to measure, though much harder to in uence. If you'd like to
learn more about Leading and Lagging KPIs, check out this post.

KPI Reporting

Creating relevant, measurable and time-bound key performance indicators is great, but
it's only half the job done. The other half (which can often go overlooked) comes down to
guring out how to actually track and report on them appropriately and accurately. While
it can be tough setting up this kind of tracking and reporting, if you don't create an easy
way to view and stay on top of progress, the KPIs aren't going to be much use. A KPI
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report is a presentation which displays and communicates the current performance of

an organization compared to its business objectives. It's a tool used by management in
order to analyze performance and identify issues. These reports can take many formats,
including formal written reports, spreadsheets, powerpoint slides, or dashboards.

Dashboards

Creating a KPI dashboard is a great way to provide at-a-glance views of key performance
indicators relevant to a speci c business objective, department, or the whole
organization. Now, before your eyes glaze over with boredom as another business term
is introduced, dashboards are just another name for a progress report. However, what
makes dashboards more powerful than your typical business report is that they're
usually hooked up to business systems so the data is automatically updated. The bene t
of this is it ensures the data is always relevant, as it doesn't rely on someone in the
organization continuously updating numbers. This is just one of the many bene ts of
using dashboard software for your strategy report.

Dashboards also give you total visibility of your business performance instantly, display
KPI progress in a visual presentation to keep reporting engaging, and save time when
compared to the hours poured into creating regular reports. If you're looking for help
creating a great KPI dashboard, check out this article we wrote a little while back. We
walk through how to set up a great strategy dashboard which includes all your business
KPIs for an instant snapshot of your performance. We'll also be adding more examples
of key performance indicator dashboards for speci c department in the coming months.

Final Words

This article is part of our mini-series 'How To Write A Strategic Plan: The Cascade
Model'. You can download our free 'How To Write A Strategic Plan: The Cascade Model'
eBook which contains all of the articles from the series.

Download your KPI Report Template here!

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1/31/2020 How to Write KPIs - 4 Step Approach

Download the KPI Report Template

The template is 100% free and comes in Excel format allowing you to create
beautiful KPI reports and dashboards for your organization.

DOWNLOAD TEMPLATE

You can also nd the individual articles here:

1. How To Write A Strategic Plan: The Cascade Model

2. How to Write a Good Vision Statement
3. How To Create Company Values
4. Creating Strategic Focus Areas
5. How To Write Strategic Objectives
6. How To Create Effective Projects
7. How To Write KPIs (This Article)

As always, here's a quick recap of the Cascade Strategy Model and how this post ts into
the bigger picture.

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1/31/2020 How to Write KPIs - 4 Step Approach

Following our 4 step method on 'How to Write a KPI' will help you create great KPIs for
your organization. As always, let us know what you think of our process and if it's helped
you create KPIs for your organization by commenting below or jumping on one of our
social cha

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Topics: KPI

Comments

Benson Mwesigwa 2/20/2019, 8:45:17 PM

Very insightful and well articulated. Thanks guys

 Reply to Benson Mwesigwa

Maddy Mirkovic 2/21/2019, 9:59:03 AM

Thank you Benson. Glad to hear you found value in the article! If you have any strategic
planning issues we could address and develop into an article, we'd love to hear from you!

 Reply to Maddy Mirkovic

Ahmed 8/6/2019, 9:22:53 PM

Great, Thanks

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 Reply to Ahmed

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