Non-financial KPIs are critical to predicting, and in turn shaping, the future of a company. The KPIs (financial and non-financial) that you choose to measure will have a direct impact on the direction of your business: they have a powerful motivating effect and as a result determine the way that employees set their priorities.
Where financial KPIs have been over-emphasised at the expense of non-financial KPIs, business leaders will often find that they have inadvertently instilled their employees with short-sighted goals, which may be detrimental to the business’s long-term viability. Therefore, it is imperative to integrate non-financial KPIs into your actions plans.
The steps below have been designed to help you implement effective non-financial KPIs that will align your employees’ priorities with those of the organisation:
1. Identify potential obstacles
Prior to developing your action plan and KPIs, it is important to identify any potential obstacles and pitfalls that may undermine your future success. These may be recurring issues, or new problems that accompany your plans for the future.
2. Undertake root cause analysis
Once you have identified your potential obstacles, you will need to undertake a root cause analysis. Addressing the root causes of the issues should be part of your new action plan.
3. Map causality links
Translate your strategic plan into key objectives, sub-objectives and key actions. These three tiers have clear causality links: the key actions should lead to the realisation of the sub-objectives and the sub-objectives should contribute to the key objectives. It is important to note that the causality links will need to be regularly reviewed and reassessed.
4. Determine accountability
Accountability for each individual objective and sub-objective should be allocated to a specific owner, who should be supported by a team of contributors.
5. Develop KPIs
Identify the desired result for each objective and consider various ways that this result can be measured. Determining a reliable measure for qualitative outcomes is challenging, and you should spend some time considering variables that may impact the effectiveness of non-financial KPIs.
6. Evaluate KPIs
You will need to constantly assess the effectiveness of your KPIs in determining whether or not the objectives of your action plan are being realised. It is important to consider whether or not improvement in one area is coming at the expense of another.
7. Respond to findings
Most importantly, you will need to respond to your results. It is likely that you will encounter some issues in the reliability and effectiveness of your non-financial KPIs, and responding to these issues is the only way to assure improvement.