KPIs Aren’t Just About Assessing Past Performance - Deepstash
KPIs can predict the future

Executive teams use KPIs (key performance indicators) to track success. They are used as reports that provide feedback on the past.

But if used properly, they can become a powerful tool to predict changes in the future. The key is in mapping and measuring intervals.

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The end goal for a business is growth. It requires the support of stakeholders with the business owners and investors.

If a business can keep employees happy, it can predict a good relationship with suppliers. Together, the good employee-supplier relationship leads to great outcomes for customers. In turn, an effective relationship between these three stakeholders drives results for investors at the end of the queue.

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Tracking relationships can release the full predictive ability of KPIs.

  • Identify the company's key stakeholders, e.g. employees, suppliers, customers, etc.
  • Review the relationship that each key stakeholder group has with the company. E.g. for employees, a company may not want staff turnover, and employees may desire to be paid well. KPIs can be developed which benchmark the company's reward system against industry standards.

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The relationship between KPIs should be mapped in a cause-and-effect diagram to understand how one KPI impacts another. It requires as little as a whiteboard and a pen.

Choose an end goal and write it on the right-hand side of the board, e.g. for a company to invest funds in its subsidiary. Then, working from right to left, consider what would create this outcome, e.g. profit, return on capital employed, net cashflow.

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The mapping process shows how a scorecard of KPIs provides a predictive performance model when viewed as a map. 

Ensure you have the KPIs measurement intervals. A measurement interval means the time between readings on a KPI. For example, it may be that the input in the cause-and-effect diagram should be monthly or weekly to be useful.

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