Key Performance Indicators (KPIs) have become an integral part of business management. When developed effectively, they can help to define a picture of success while also horizontally and vertically aligning people and functions to specific goals. This fosters a sense of both personal and shared accountability. Ultimately, it’s only what is tracked, measured and evaluated that gets managed. However, despite the obvious necessity to leverage KPI’s as a tool to enable success, an extensive MIT Sloan Management Review survey reveals that only 27% of companies strongly influence process and people management through their KPIs. What’s more, many businesses that actively evaluate organizational and functional performance against a set of KPIs limit their performance measurements to traditional and retrospective hard factors like spend, revenues, and profits which offer little insight into how a company will likely perform in the future and do not align to organizational strategy or vision.
As early as 1992, Robert Kaplan and David Norton developed the Balanced Scorecard Framework which makes use of strategy mapping to better align KPIs to strategic objectives and to go beyond outcome-tracking by incorporating critical performance enablers like customer satisfaction, internal efficiencies, talent development and culture into the KPI mix. Despite the editors of Harvard Business Review considering it to be one of the most influential business ideas of the past 75 years, it is only a minority of companies that are fully leveraging scorecards to drive effective decision-making. Moreover, now that 27 years have passed since the Balanced Scorecard was initially introduced, new soft factors like agility, purpose and reputation have come to the fore and new intelligent reporting technology is allowing progressive data-driven companies to get a massive head-start on the rest of the field.
Agility is vital in a rapidly evolving world
Leader of organization design at Mckinsey, Aaron De Smet, defines agility as an organization’s ability to renew itself, adapt, change quickly and succeed in a rapidly changing, ambiguous, turbulent environment. It is increasingly becoming one of the most important soft assets a business can embrace. Considering the pace of change that businesses are now experiencing — with accelerating technological innovation, intensifying competitive pressure and fast-evolving customer expectations — it has become increasingly important to be flexible and swift in terms of decision making.
For that reason, consider appropriate agility measures like speed-to-market, decision-making time-frames etc. in your company scorecard.
Enhancing agility with technology
Rapid and efficient decision-making requires improved analysis and reporting tools that provide an ‘at a glance’ yet dynamic view on business health. Expect companies to start leveraging consolidated multi-variable reporting tools which include hard and soft KPIs, supported by AI and machine learning, to make informed business decisions. According to an MIT Sloan Management Review article Leading With Next Generation Key Performance Indicators, machine learning is poised to radically influence how executives use KPIs to monitor and spur growth. As next-generation predictive algorithms are incorporated into business process planning and design, they seem destined to inspire next-generation digital dashboards. KPIs will consequently offer predictive and prescriptive indicators, not just rearview-mirror reviews. Data-driven companies that leverage these advances by reconceiving their KPIs will enjoy distinct competitive advantages.
Being accountable to purpose
Next generation consumers and employees are motivated and inspired by a very different set of principles and priorities. A purpose-driven culture is essential to attracting next-generation talent and to connect companies and brands more authentically with their target audience. It is becoming increasingly important for businesses to establish a greater level of affinity and emotional connection with their customers. When done in an honest, genuine manner, this can be one of their strongest soft assets.
Companies are encouraged to clearly articulate their purpose statement — a reason for being that supersedes sales and profit and identify practical and organizational measures to track their commitment to this purpose.
Other Soft Factors considerations in KPI Reviews
Corporate Culture: Corporate culture can be a powerful soft asset. Consider using internal surveys to track culture scores and to gauge employee morale, loyalty and satisfaction.
Brand and Reputation: Consider appropriate measures to track perceptions of your business amongst your target consumers or potential employees.
Talent Management: Incorporate measures to assess company performance in attracting and retaining the right talent, and progress with training and development, diversity scores, etc.
Customer focus: Consider measures that can track product satisfaction and brand equity and understanding where customers are at in terms of brand loyalty and advocacy.
Future proofing your business can start today. This is achieved by taking steps to align the focus areas of your functions and work-force to measurements that matter. Some introspection to really understand what success means for your company and what enables that success may be required. However, this is vital and what winning companies do. Reap the benefits by cultivating soft assets, demonstrating a real commitment to tracking your company’s performance against these soft and heard measures and embrace available technologies to support a more agile, data-driven approach to decision-making.
This article originally appeared on Forbes.