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Success Secrets and Stories
The Hidden Power of KPIs: Metrics That Drive Business Success
Ever been blindsided during a performance review when your boss asks about KPIs you didn't even know existed? You're not alone. The world of Key Performance Indicators can seem mysterious and intimidating, but mastering these metrics is essential for leadership success.
In this revealing discussion, hosts John Wandolowski and Greg Powell demystify the often misunderstood concept of KPIs. They break down exactly what these quantifiable measurements are and why they matter: driving performance improvements, enabling data-driven decisions, and ensuring your daily work aligns with broader organizational goals. Far from being abstract corporate jargon, KPIs directly impact your compensation, career trajectory, and effectiveness as a leader.
The hosts share candid stories about their own experiences, including John's eye-opening moment when he was asked about KPIs after a year on the job—without ever having discussed them previously. They explore how these metrics are used in various industries, from electrical management to healthcare, and provide practical examples that bring these concepts to life.
Perhaps most importantly, they offer actionable strategies for taking ownership of your KPIs rather than playing victim to them. You'll learn the five key steps of an effective KPI process, how to approach management about metrics that don't make sense, and why creating artificially easy KPIs to "game the system" is a strategy that will ultimately backfire. The conversation emphasizes that regular monitoring—not just annual reviews—is crucial for meaningful performance management.
Whether you're new to leadership or looking to enhance your strategic approach to performance metrics, this episode provides the knowledge and tools you need to confidently navigate the world of KPIs. Remember: these numbers shouldn't be a surprise, but rather a compass that guides your leadership journey.
Presented by John Wandolowski and Greg Powell
Well, hello and welcome to our podcast, success Secrets and Stories. I'm your host, john Wondoloski, and I'm here with my co-host and friend, greg Powell. Greg, hey, everybody. And when we put together this podcast, we wanted to put out a helping hand and help that next generation and help answer the question of what does it mean to be a leader? Today, we want to talk about a subject that I think supports that concept, about a subject that I think supports that concept. So today we're going to talk about abbreviations and something that I think anytime you go into an organization, there's always abbreviations that you have to learn. One of the humors that I had is in the hospital world, they actually had a separate book of abbreviations, and as a new manager, you're going to hear abbreviations and you need to learn them. But one of them is very important KPI key performance indicators. And what was interesting is, I think the first thing you should understand is that they're a quantifiable measurement that tracks the efficiency of your organization achieving the statistical goals, providing clear and measurable benchmarks for success. Kpis are important because they drive the performance improvements, enable data-driven decisions and ensure that daily tasks and efforts to align to more of the broader organizational goals. So if you're thinking I don't care about KPIs, this is not in my core description of my job. I'm just going to let the chips fall where they may, and wherever the KPIs land, they land Wrong. It's the wrong way to do it, because you're going to just plain get surprised by what it is that you're going to get handed, and we'll talk about it a little bit later. How I learned about KPIs and why this is, I think, a very interesting subject to discuss. When you're trying to find out what it means to be in leadership, this is one of those key components that you usually find out at the end of the process rather than the beginning. So let's just talk about it a little bit in terms of definitions so that we can be a little bit more precise, trying to find quantifiable matrix.
Speaker 1:Kpis are specific. They're measurable, such as profit margins or customer satisfaction scores or the webpage views or whatever else you use to evaluate performance. Data is the key, and how data is collected is important. Goal orientation of a positive impact If a KPI is a good KPI, it can drive profit and it can drive better performance.
Speaker 1:The other element of KPIs looking forward and looking past. The other element of KPIs, looking forward and looking past, so you have the ability to see how the indicators have actually affected the past and predicted the future, to see what has merit, what are a good measurement. So things like sales for products or pipe or whatever it is that you're selling. You understand the indicators and how they push your organization. And then there's the lagging indicators that actually have nothing to do with revenue and at the same time they're affecting your performance or they're affecting your bottom line of your payroll and it may be time to walk away from those kind of energies and find another place to put the energy of the department. So energy in a department is an interesting segue, greg, for you to talk about how you've seen it work, especially in the electrical industry at one point. Yes, thank, you, john.
Speaker 2:So why are KPIs important in a business environment? So you think about, first, it's just plain important. Number two, it actually measures performance. And number three, and very important, it's quantitative. So let's talk about driving performance.
Speaker 2:So KPIs highlight the metrics that truly move the needle. They direct attention to the impactful initiatives and drive performance improvement. They also enable data-driven decisions. If you're not making decisions with data, you might be making bad decisions. So instead of relying on your gut right, leaders need to use clear, relevant KPIs to make informed strategic and operational decisions. And you also want to make sure everybody's on the same page. Right, you want to ensure strategic alignment. They ensure that individual and the team efforts are connected together to the company's overall strategic goals, and that creates a unified direction. Now let's talk a little bit about fostering continuous improvement, because it's really not a one-and-done idea. Right, you want to regularly track KPIs, and that allows businesses to identify the weaknesses right beforehand, understand root causes of performance declines, do some detective work and make timely adjustments, creating a culture of ongoing learning and development, john so how many times in the electrical industry were KPIs actually a meeting?
Speaker 1:It wasn't once a year. How many times did you guys meet to talk?
Speaker 2:about KPIs. So, john, with the board of directors, we would talk no less than three times, maybe four times, a year, but within the organization, between managers and their staff, every month we looked at the KPIs you have to Exactly. Foster continuous improvement. Also enhance adaptability. Kpis provide a framework for feedback and growth right how to get information in and help people grow. It allows businesses to adapt to changing conditions, such as things like shifts in consumer demand or market dynamics, because things do change. They're not always static and you want to remain competitive, so you need that adaptability. And also KPIs improve resource allocation by clearly showing where efforts are most effective. Kpis help businesses allocate resources more efficiently to the areas that will yield the highest results.
Speaker 1:Yeah, and okay, so it was kind of funny. The first time I heard KPIs it was after I had been with an organization for like 12 months and they asked me if I hit my KPIs and I asked what? What is a KPI? You guys never had that in any conversation in 12 months and KPIs are clearly something that you have to be involved with. Yeah, kpis are clearly something that you have to be involved with. If they say that there's a measurable matrix in order to align performance, you should have been collecting that data. If you have basically a blank stare when they ask what is the performance, you're not going to go very far in a conversation.
Speaker 1:The other part that's really interesting. Bonuses yes, they sometimes are applied to leadership positions. They're based on KPI compliance. It's a reward for active, effective management, it's a quantifiable target and it's an element of business success. Kpis are really part of your base pay to ensure that a fixed salary reflects performance and marketing standards and is reflecting something in terms of what you have done as a reward for the efforts to keep the company online. Greg, you've seen this happen in the past, where people haven't really been involved in collecting their data and start to play the victim card.
Speaker 2:So, John, let me talk a little bit more about how KPI is linked to compensation.
Speaker 1:Yeah.
Speaker 2:So performance measurement KPIs offer objective data on how effectively an employee or team is meeting their goals. So objective versus subjective data, very important. Motivation and incentive. If you set clear performance targets, kpis are going to motivate employees to excel not just get by, but excel and work towards the objectives, providing a direct incentive for achieving them. How about alignment with business goals? Kpis ensure that the efforts of the employees and teams are focused on achieving the company's strategic and operational objectives, and this one, I think, is really, really important. Transparency, right, not playing a shell game here. I want to make sure everybody knows what's going on. So, being transparent and fair, well-defined KPIs create a transparent system where employees understand how their pay is determined, leading to greater fairness and improved morale. And even though you'd like to think they're just there because they enjoy doing their job, they want to get paid.
Speaker 1:They want to get paid fairly right and so also the ethical piece starts to kick in in terms of the fairness of the organization, especially if it's a publicly traded stock. You want to make sure that you can demonstrate that kind of fairness approach and how you're handling purchasing and how you're handling the books in general.
Speaker 2:And one last piece on the link to compensation customization. So don't sit there and say, well, my organization really can't create KPIs. It's not a standard kind of organizational process. That's not correct. Kpis can be tailored to specific roles and specific departments. It allows compensation structures to be customized to different job functions and different levels of responsibility, so everyone can participate in the use of KPIs.
Speaker 1:And what was interesting about KPIs for me is especially when I was a new manager and the first time that I was dealing with a potential bonus. I didn't understand the KPI process and just to talk about how it was applied, the process is a variable pay that is inherent in terms of KPIs that provide a matrix to determine how much an employee receives, or their targets, and the employee is informed in terms of a specific performance target that must be achieved in order to qualify for the bonus. And then there's what I guess I'm trying to allude to is direct results. They're tying the bonus into achievable KPIs that create a link between performance and reward. If you're not aware of the targets, you should at least have the organization working against the targets, as, being a new manager, there should be people that are working on things that are important to the organization.
Speaker 1:Kpis for your staff shouldn't be a surprise. If it is a surprise for them, you have a bigger issue and KPIs can affect the bottom line, the true base pay. Bigger issue and KPIs can affect the bottom line, the true base pay. They'll do a market alignment of a KPI, assessing the market competitiveness of an organization, to enhance the reward system, to influence decisions based on not only paying the talent but attracting talent and retaining talent. And when you're dealing with KPIs, some organizations, straight up, just put it in the net. Some organizations start with the conversation of a KPI and they'll often talk about what is fixed, what is performance related, what is influenced over time and how KPIs are in the review process and they provide even the scales that are associated with adjustments for salaries. Those are all kind of important things. So KPIs are really evidence of performance for salary adjustments and promotions, and I can't stress it enough saying it should not be a surprise to you, greg Right.
Speaker 2:In yearly performance reviews, and John and I have talked about performance reviews and career reviews. Key performance indicators are really important. They're used as objective, quantifiable measures to assess how well an employee or the team that they're on have met their goals, providing a data-driven again basis for evaluating success and identifying areas for improvement. Kpis offer clear, unbiased benchmarks for performance. They ensure alignment with strategic business objectives by measuring progress against targets related to productivity, customer satisfaction, efficiency. I remember back in the day we would measure quality. So many different kinds of measures fall under KPIs, so my performance in achieving the KPIs will be on my yearly review. Oh my gosh, that's right and that's where you want it to be. All right, I'm sorry, but here's some examples of KPIs and performance reviews.
Speaker 2:Let's look at the sales department how about total sales revenue? How about generating new leads, that being a KPI right? And let's never forget customer conversion rate right, Very important. Now let's take a look at customer service CSAT right. Customer Service Satisfaction Scores. Average response time to call center how quickly do they get back to people? First-time call resolutions how many calls does it take to get resolution? Let's talk about productivity Percentage of tasks that are completed on time. And then let's take a look at project completion rate. And then, finally, efficiency. Let's take a look at the reduction in overtime hours and cost per unit.
Speaker 1:John, a KPI isn't what you expected. A KPI doesn't sound like something that your department should be doing. Here's the newsflash it's your job to make the new KPIs. If you don't think that they're relevant, a little bit of what you should understand is what are the key steps of a KPI process, so that there's actually some steps to understand if you're going to basically argue with it or create new ones. What's involved? You have things like identifying the KPI, creating the KPI, evaluating KPI, defining change and assessing where you're at. So let's just step back and go over those one more time To identify you're setting up a relevant KPI for tracking the company's performance. Creating something means that you need to have a way of measuring it, and whether it's big dashboards or scoreboards or, in my case, energy output, volume of energy used versus the energy conservation concepts, you have to do an evaluation. That, by the way, is the third step Evaluating how well these business goals actually move the business and whether they're a relevant KPI. That, by the way, is your window on how to change something if you don't think it's a properly applied KPI. The fourth step is change. Whether it's a strategy, whether it's a process, whether it's an enhancement to equipment, whether it's even a change of equipment in order to make it something different. All those things are part of how the KPI can be enhanced or improved upon. And then there's an assessment. Now you've changed your KPI and you need to talk about how that goal is altered and what is involved in order to show that performance is actually being accomplished. So there's obviously a lot more to the discussion of KPIs.
Speaker 1:The thing is, you can't play victim. You have to get involved in KPIs. If they don't make sense, nobody's going to hold your hand and explain it. Some other secrets the annual assessment is not when you do your measurement. It's ongoing. It's ongoing. It's ongoing. You have to be doing this. In my world, we were doing it every month as a minimum, and I had people assembling responses to KPIs weekly on energy management. So, depending upon how the goal is actually measured, they actually had people checking energy daily and that's all.
Speaker 1:To make yourself more proactive in order to make the changes so that you're spending the least amount of money, there's that KPI magic dust You're reducing costs and however, proficiency, whatever the assets, the goals, the measurement equipment that you need in order to accomplish that end result, you better be asking for it because it's a clear requirement If there are too many KPIs. It is a conversation that should be had at the beginning so that it's more tangible for the department to actually be effective in order to make a change. And we have to be careful between an individual KPI and a department KPI and a company KPI, because sometimes they drift in and drift out, depending upon whether you're managing that process or not. Some organizations actually have people that are dedicated to creating KPIs and I think that's the other piece that I haven't seen in my experience, but I know at other organizations that does happen. But in my world, if you're not authoring it, you're just going to play victim and the last thing you want to do is sit in a review and have the KPIs that you haven't been measuring and everybody gets surprised as the output at the end of the year. It's not a good KPI and it shouldn't be a gotcha game at the end of the year either. These are matrix based or performance based goals that you should be dealing with and if you're overwhelmed and it's too difficult, they'd like to do things called stretch KPIs. So if you don't understand that, if you're in a yes or no KPI or a stretch goal KPI, you better get that information on the front end as quickly as you can, because you can go through a KPI evaluation and not meet any of the requirements and you don't want to be shocked to hear that you've actually done a good job. And you don't want to be shocked to hear that you've actually done a good job because it's basically going to show your hand that you've really not been involved in what the KPI process was actually trying to do. It helps focus employees so that they control the end result and they can influence the end result. That's the bottom line and you're creating a matrix that has impact and it has some meaning.
Speaker 1:Stay adaptable. Regular assessments of KPIs can ensure that the remaining relevant and involved business objectives are being met. A KPI should have a sense of a start at the beginning of the year and show the change or progress as it goes throughout the year. Using KPIs is just one tool that helps in terms of management. It's not the only tool. You have to make sure that there are soft skills and there are performance-based, data-driven ideas. Kpis are different type of applications showing that you're doing a good job performing their task. In my world I had people who were retiring and they were asking what was I doing to build a bench? How are we preparing people to actually be advanced? And it was a KPI. That is a very forward thinking kind of KPI and a great example of something that we should be doing in today's current KPI environment. Great.
Speaker 2:So let's talk about the what if? What if the organization you work for does not have any KPIs for your particular business application? Should you just create some easy ones to see if you could get a pay increase? You know, kind of sandbag a little bit. No, don't do that. It's a bad idea to create easy KPIs simply to get a pay increase. Such a tactic is transparent to management and can damage your credibility. Get a pay increase. Such a tactic is transparent to management and can damage your credibility.
Speaker 2:The better, more ethical and, ultimately, more effective strategy is to proactively create meaningful metrics that demonstrate your real value to the company. So what are the risks of setting easy KPIs? First and foremost, it damages your personal credibility. Creating self-serving, easily achieved goals will signal that you are more focused on personal gain than the company's success. This erodes trust with your manager and leadership. It also devalues your role as a leader. By using simplistic metrics, you miss the opportunity to highlight the complexity and strategic importance of your work. So you're selling you and your department short. Also, it can be seen as disingenuous. Your manager may perceive this as an attempt to game the system rather than a genuine effort to improve performance, which could harm future review outcomes. And it's probably an ethical question here as well, if you're willing to kind of quote game the system.
Speaker 1:Especially if you think you're putting one over on them and it's transparent to people who have been doing it for a long time, you're probably not going to fool them. So, when you're thinking about a better strategy and really, how do you handle it being proactive? I'm going to try to break it down quickly for you. Understand the company goals and if the KPI doesn't really have anything to do with the business challenge, it Two is developing data-driven matrix. I will tell you right now the more that you can spend time to develop a database matrix that you can show how the data was collected minimizes interpretations, and that's a KPI that is fair. If you're not hitting the mark, it's an honest way of trying to communicate the issues, but you better be prepared to explain why you didn't hit those marks. It's also the opportunity to see whether it's something that you need to redo because the KPI isn't effective in terms of what you want as an end result improving the business. That's an example of where you need to take responsibility, and probably the last part is the most important part.
Speaker 1:Kpis is a strategic decision. You're supposed to be talking to your manager on whether the KPIs actually make sense. If they don't, you have to pick up the mantle and run into the office and say we need to sit down and talk about this because the KPIs don't make sense. And you know, greg, how much of a surprise is it to jump into the manager's office saying KPIs and not giving them at least a heads up on what you're going to be talking about. The pros and the cons.
Speaker 2:Yeah, john, you absolutely need to give them a little heads up and let them get prepared for responding to the question about the KPIs. You don't want to just catch them off guard because nothing good is going to come from that. So if you're a professional, you want to be even a bigger leader in the future. Give them a little advanced notice. Let them know what you're looking for, give them some time to put it together and then make sure that you're prepared as well to make it a productive conversation when you get to talking about creating KPIs.
Speaker 1:Yeah, and one of the things that we've talked about in the past is an SBAR report situation, background analysis, recommendation One page, super simple. If you're going to sit down and talk about a KPI, that doesn't make sense. Hopefully you don't have a bunch of them to talk about, but you would write one SBAR report for each KPI that you want to talk about and try not to mix them clearly because you want to be able to make those changes. To mix them clearly because you want to be able to make those changes, and you'll get more of a clear kind of support or a pushback if you are asking those questions on an SBAR report before you sit down with the manager, so that they know what you're going to talk about and they know what you've discovered. And now you have a very productive meeting. So hopefully this has been some help and, if you like what you've heard, I've written a book called Building your Leadership Toolbox and we talk about tools like this and it's available on Amazon and Barnes Noble and other sites.
Speaker 1:The podcast is what you've been listening to. Thank you so much. It's also available on Apple, google and Spotify. A lot of what we talk about is from Dr Durst and his MBR program. If you'd like to know more about Dr Durst, you can find out on successgrowthacademycom, and if you'd like to contact us, please send me a line. That's wando75.jw at gmailcom. And the music is brought to you by my grandson, so we want to hear from you. Drop me a line, tell me what's going on, what you like and what you would like to hear about. It has always helped us to create content. Thanks, greg. This was fun. Thanks, john, as always. Next time, yeah.