Confusing KPIs and Targets
The first in our Business Balls Up series is all about the difficulty many get into when they confuse Key Performance Indicators (KPIs) with Targets and end up treating them as one and the same thing.
So first things first - they are not the same thing - not even kind of the same thing.
When businesses merge the two they usually end up managing the wrong aspects of their sales and then struggle to properly understand why they have missed their targets. It’s usually because they can't untangle the mess.
- Targets are the outcome that you want to achieve
- KPIs measure the activities that get you to target
So, by default, you can’t really manage targets. What you can do is manage KPIs and, provided you have developed relevant ones, you’ll find targets being achieved without you really focusing on them at all.
When looking at sales you should never focus on what the monthly or quarterly target might be. Focus instead on what needs to be done in order for that target to be hit. It is the activities that generate the result and it is the activities that you manage and measure on a daily basis.
It is also crucial that you reinforce this relationship with your people.
Never reward according to KPI performance, only ever reward according to target achievement. If you ensure that your people fully appreciate and understand what activities (and what activity levels) will result in them hitting their target, they will focus on those.
Manage to their KPIs but pay for economic output, not economic activity
This is all dependent on you understanding your metrics and making sure they are relevant to your targets.