What is effective KPI design for new business goal management? Steps and tips explained

What is KPI Design?How to set quantitative indicators for each business process toward the final goal and manage progressIt is. By using these indicators to manage the business so that it progresses as planned, the entire team is guided to the goal.

What are KPIs and KGIs?

KGIis the finalIndicators to measure the degree of achievement against goals, ,KPIis the finalIndicators to measure the progress of each business process toward the goalIt is.

KGI stands for Key Goal Indicator.Key Target Achievement IndicatorsKPI stands for Key Performance Indicator.Key Performance IndicatorsThe term "KGI" is translated as "sales" in Japanese. For example, if a retailer sets a KGI with the goal of achieving "sales of 10 million yen in the current fiscal year," KPIs are indicators such as "number of store visits," "purchase rate," "average customer spend," "number of new customers," and "repeat rate" necessary to achieve the goal.

KGIs and KPIs are in a logic tree relationship, with KGIs at the top of the tree,KPIs are the parts that branch out and spread outThe following is a summary of the results.

Benefits and Cautions of KPI Design

When designing KPIs,Clear process to goalto be, and individuals to achieve their goals.Clarity on what action to taketo be,Clear evaluation criteriaThis is a good way to keep the whole team cohesive and focused on the goal. This keeps the entire team cohesive and focused on the goal.

In most cases, when KPI design is done company-wide, it is done top-down. This is because bottom-up approaches make it difficult to align across sections. For this reasonDisadvantages such as increased pressure on individuals and difficulty in developing the ability to thinkThere are also Take measures such as frequent communication within the team.

Setting Withdrawal Conditions

In the case of a new business, it is quite possible that the business will not proceed as planned and the company will withdraw from the market. BeforehandSet withdrawal conditions.It is also important to To minimize losses, decide who will make the final decision when and under what conditions.

Procedures for designing KPIs that work backwards from the goal

KPI design isWorking backwards in sequence from the goalWe will do the following. Once the goal is determined, the process to reach the goal is broken down, and important processes are identified and indicators are set up to measure the results.

Set Goals

First, a goal, or KGI, is set.It is important to be able to measure quantitatively using concrete figures.It is. If the goal is unclear, you may just start working and keep working, not knowing whether you have achieved your goal or not.

For new businesses, the first goal is often to get the business off the ground and into the black. To achieve this goal, the break-even point is calculated, and the necessary sales, expenses, and profit margin are derived. Then, a specific goal is set, such as "profit margin of 0% for the current fiscal year.

Break down the path to the goal

nextBreak down the process to achieve the goalThe following is an example of a process that is necessary to achieve the goal of "profit margin of 0% for the current term. The process necessary to achieve the goal of "0% profit margin for the current fiscal year" is considered to be the process to increase sales.

For example, for salespeople, the path can be broken down into the number of business meetings needed to increase sales, the number of appointments needed to increase business meetings, and the number of phone calls needed to increase appointments. It can also be broken down into a logic tree, where what is needed to increase sales is the closing rate, what is needed for the closing rate is sales opportunities that are likely to close, and what is needed for sales opportunities that are likely to close is narrowing down the target audience.

The process for keeping costs down is also directly related to the goal of profitability. If you already have an existing business, you may also want to consider processes that may have synergies with the new business, such as attracting customers and sales channels. Thus.Breaking down the path to the goalThe following is a list of the KGI processes that are to be considered. However, omit processes that do not affect the KGI. This is because KPIs are meaningless and wasteful.

Establish indicators to measure results

Of the decomposed process,Pick up elements that you can control, especially those that you focus on.The following is a list of the elements that will be used. For each of these elements, set an indicator that says, "To be 00 by 00. This is a KPI. For example, in the case of a sales person, KPI might be set as "to have 100 sales opportunities that can be expected to close by the end of the year" or "to have 100 appointments by the end of this month".

In the case of new projects, it is not uncommon for KPIs to not be achieved as planned. In such cases, the actions toward the goal must be modified.Set indicators that are easy to grasp and measureLet's do it.

What is the SMART model of KPI design?

The trick to designing KPIs is toUsing the SMART model for goal settingThe SMART model has five components, each of which is referred to as "SMART," an acronym for its English counterpart.

distinctiveness

The S in SMART is Specific. It means specific and easy to understand. If the goal is vague, it is difficult to know what actions to take.By being specific, it leads to actions to achieve the goals.We are going to do it.

metricity

The M in SMART is Measurable. It means measurable.If the goals include numerical values and are quantitative, it is clear what needs to be done to meet the goalsIt also makes it easier to measure the degree to which goals have been achieved and to make improvements and refinements. It also makes it easier to measure the degree to which goals are being achieved and to make improvements and refinements. Instead of "to become a restaurant that customers want to come back to again and again," you should say, "to achieve a repeat customer ratio of 0%.

realistic

The A in SMART is Achievable.Whether it is feasible to achieveThis means. Setting unreasonable goals that are unlikely to be achieved may put undue pressure on members and affect their motivation. Also, setting KPIs for elements that are difficult to control by oneself is another cause of a lack of realism.

Consequence thinking or relevance

The R in SMART is Result-oriented or Relevant.Relevance of goals and KPIs is also important.It is an element of the "what" factor. The relevance of what the goal is for and what lies beyond the goal is easily understood, which leads to the feeling that one's work is contributing toward the goal. This will also help maintain and increase motivation.

timeliness

T in SMART is Time-bound.Establishing deadlines.should also not be overlooked. In many cases, without a "by when" deadline, the decision will be made to prioritize the usual tasks and "do it sometime soon". Even though the action is truly necessary for the goal, it will unintentionally become a low priority. Only by setting deadlines can goals and actions be connected.

Let's move forward with new business by designing KPIs that meet your goals.

We have introduced the steps and tips for designing KPIs. Keep an eye on goal management, especially for new projects.Designing KPIs and going into business to monitor the progress of the plan in real time and consider next actions.The following is a list of KPIs that can be used in your new business. Let's design KPIs that suit your business and promote your new business while keeping in mind the points to be noted.