As a former business manager at Microsoft, I am almost bred up on KPI’s, metrics, tracking progress and so forth. Sometimes even to the extend where I have a hard time understanding, why it is a more alien concept to many. Including some startups.
The way I usually frame it is that you cannot play football, if you don’t have goal posts that help you decide, when you have scored the winning goal. Or any goal for that matter. If you don’t have goals, you’re just kicking around, and while that can be nice exercise too, it’s kind of hard to measure who’s winning and who’s losing.
So, if we accept that being able to set goals and track progress can be helpful, how do you go about it in a way that doesn’t kill you in bureaucracy.
This is where I actually back in the day got a great tip from my colleague at Berlingske Media, CFO Peter Nordgaard. He had a very simple way of looking at things and how to determine real performance that goes something like this:
You basically have 3 things you’re looking at in a traffic light perspective to set goals and track progress:
First you look a the market and the macro economic climate. What’s your assumptions related to overall growth in the economy YoY. Make that your target.
Then you look at the competition in the market. What’s your target market looking like? How much is it growing? Make that your first target? How much share are your most important competitors looking to grow? Make that your second target (and in effect your pre-dominant benchmark).
Finally, look at yourself. Given your assumptions about the economy, the market and the competition, how do you think you yourself is going to do? How much is you going to grow? What does that mean in terms of products shipped, sold, used or whatever your Northstar metric is?
Does your Northstar metric make sense in the light of all of the above (aka is it still valid as the most important single denominator in determining your progress)? If yes, good. Keep it. If no, come up with one that is.
Now you essentially have a Northstar metric and three sets of simple KPI’s you can track in order to determine your progress. And this is where it gets interesting:
If you end up short but the economy and the market has exceeded expectations, you will know that the buck stops with you. On the other hand: If you have done better than expected for the economy and the market, you have really put in a stellar performance.
While that in itself is super simple, it does another thing that is really great: It eliminates any doubt as to what should be the focus of your review and discussion about what to do going forward.
Because if it is your own performance that is sub-par, it will be evident, and you don’t have the need to come up with silly excuses. You can address the real problem. And move on from it.
So think about this super efficient approach the next time, you’re discussing KPI’s and ways to track your progress. We’re not too far off the start of a new year, so this might actually be as good a time as any.