Is Your Company Tracking the WRONG Things to Get Results?

You likely look at plenty of numbers in your company. But if they have $ signs associated with them, you may have a problem.

Most metrics with $ signs are are historical. They don’t provide intelligence. They are lagging indicators and as a result they provide us a snapshot rather than providing us a trend.

The problem gets magnified when most management teams get so focused on tracking results that they don’t identify their true performance drivers.

Let me give you a real life example of this. We have all seen a plane in the air. But what is driving the performance? The result of the airplane’s performance is its speed and the jet trail behind it.

The real performance drivers of the plane are things like the people, engine, fuel, and other factors. The speed of this plane is mission critical but it is the result, not the performance driver.
iStock_000000599434_Medium

Let’s apply this to a company. The plane is the company and revenue and profits are the results and not the underlying performance drivers. And since more often than not companies choose to track revenue and profits as the primary drivers, many of these companies don’t meet their sales and profit targets.

So, let’s simplify this picture further.

If it is performance driver, it should be called “Key Performance Indicator” or KPI

If it is a result, we call it a “Key Result Indicator” or KRI. Let’s take another quick example.

car-illuminated-dashboard-000039016182_Large

In your car, your speed is a Key Result Indicator. On the other hand, your temperature gauge is a Key Performance Indicator because it tells you if the car is running hot or not. Your RPM (revolutions per minute) is also a Key Performance Indicator because it tells you how efficient your car is running to achieve its speed.

Are you tracking Key Performance Indicators ( KPI) or Key Result Indicators ( KRI)?

Because if you have these mixed up, you likely have a great opportunity to boost your company performance.

Let’s take a deeper look into the differences between Key Performance Indicators vs. Key Result Indicators.

A KRI will tell you what conditions are normal or abnormal. For example, If you look at your Profit and Loss Statement, it will tell you whether you hit your numbers. Key Result Indicators are typically financial measurements and provide a historical perspective.

Conversely, a Key Performance Indicator will tell you mid-stream if things are abnormal and if your company is at risk of not hitting its targets. This is because the right KPIs will provide actual intelligence which should allow time for corrective actions so your company can actually drive the desired result.

If there is a $ sign associated with a metric, then most likely it is a Key Result Indicator and NOT a Key Performance Indicator, and if that’s all you’re tracking that may be the reason why you’re not maximizing your company and employees’ full potential.

Are you maximizing your company's growth and valuation potential?
Get your free score + 5 custom scorecards to see a point by point analysis of your company.

Popular Videos

Creating Circuitry in Your Company

The 5 Pillars of a Successful Business Model

The value chain that determines company sale value

5 Ways Key Employees Hijack Company Sale Value

Lowering Risk to Increase Valuation

The Top 8 Things Business Buyers Look for in a Business

Tags

Leave a Reply

Your email address will not be published. Required fields are marked *

Let’s connect

Interested in Growing or Selling Your Company ? Let’s talk!