The SMART Way to Set Key Performance Indicators

26 February, 2019

12 mins read

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Definition: Key performance indicators (KPIs) are a set of goals you set for your staff to achieve to help grow your business. For example, completing a specific number of jobs in an hour or selling a certain number of products per day are both KPIs.

Setting KPIs for each of the different staff members or teams in your business can provide direction, responsibility and satisfaction. However, if they’re not implemented correctly, they can also do the opposite and demotivate your staff and destroy your company culture. There is a way to strike a balance of keeping both your staff and your accountant happy—and we’re going to show you how.

Related: The Key to Amazing Organisational Culture.

The key is to stick to the SMART methodology. That is, making your KPIs specific, measurable, achievable, relevant and time bound. Read on to find out exactly how to create the perfect harmony between all of these components.

What are SMART key performance indicators?

S = Set Specific Key Performance Indicators

Unfortunately, setting key performance indicators isn’t as easy as telling everyone to do a good job. You have to take into account all the different roles people play, their level of seniority, how long they’ve been with the business, etc. So, it makes sense that the first thing you should do is:

  • Write a list of every position in your business and the different levels of experience within them (trainee, mid-tier and senior/supervisor).
  • Add to each, a list of their responsibilities.

Next, you’ll need to set the specific priorities you want to measure.

Key performance indicators can create a peaceful office

M = Make Measurable Key Performance Indicators

When you’re choosing what KPIs to give teams or individuals, remember, you have to be able to track the results. This is easy when it comes to sales as you can measure by a dollar amount or number of contracts, however, some other industries or roles may be a little trickier.

Things you may want to measure:

  • Number of jobs completed in a day.
  • How fast calls are answered (under 20 seconds is optimal).
  • Orders packed and shipped.
  • Number of contracts signed.
  • Sales budgets achieved.

Interactive Voice Response (IVR) software, such as Zendesk and Twilio, allow you to manage call centre (or basic customer service) logs. You can track and record calls, set up voicemail services and more. The other software you use will depend on your industry and the roles involved.

By setting specific, measurable key performance indicators, your staff will know what you consider a priority for their role. This creates responsibility and security in your staff, as long as their goals are achievable.

A = Apply Achievable KPIs

While key performance indicators should ensure everyone is working at a productive rate, they can be demotivating for staff if they’re not achievable. Again, how you create achievable KPIs will depend on the position you’re creating them for, so we’ve put together a few tips for common roles.

KPIs for Calls

Start by tracking how many calls your business receives every day for two weeks. Take note of how long each call lasts. Now, work out your daily call average and how long the average call takes to complete. Assuming your call-focused staff are on set hours, see how many people you’d need to answer your average number of calls for the average amount of time in a day. You’ll also want at least a 25% safeguard for people being away sick or on holiday and other responsibilities.

At this stage, you may find you either have enough staff to take care of it or not enough. If you have enough staff, this is when you can set your specifications. Things to consider:

  • Having no calls going to voicemail during business hours, unless all lines are busy.
  • Answering all calls within 3 rings (or 20 seconds) unless all lines are busy.

Key performance indicators for call centre

KPIs for Sales

There are a few ways you can set KPIs for sales people. These include:

  • A specific number of contracts signed.
  • Achieving individual and team budgets.
  • Retaining a specific number of existing clients.
  • Bringing in a specific number of new clients.

However, KPIs need to be adjusted for different products or services, where they’re located, times of the year and who they’re selling to. If you have harder to sell locations or areas of your business, ensure you put your best sellers who can achieve the KPIs you want or lower the expectation.

KPIs for Order Fulfilment

For a minimum of one week, track how long it takes to fulfil each order that comes in. From this data, you can see how long the average package takes to fulfil. As we mentioned for calls, you should see if you have enough staff to fulfil the average number of orders you receive a day during their working hours for the average time it takes to fulfil. Remember to add a 25% leeway and account for peak times, like holiday or sale periods.

Remember, during peak holiday periods or if you’re running a promotion, you may need to hire more staff or adjust your KPIs.

R = Roll Out Relevant KPIs Only

You should only roll out key performance indicators if they are relevant to your business and for a purpose. KPIs should be put in place to improve or maintain customer satisfaction, staff productivity or sales.

A lot of business owners believe setting KPIs will make their staff think they don’t trust them, when in fact, if done right, it does the opposite. As mentioned above, KPIs help include your staff in the direction of your business and what is expected of them. To meet their KPI it gives them responsibility to ensure they’re on target, or to seek help to assess the KPI or how they can meet their goal.

T = Target Time Frames

All KPIs should have a deadline. You may choose to measure calls on a daily basis, sales in a quarterly period or orders fulfilled in a timely manner in a week. However, you should also set a period to assess and report on the effectiveness of your KPIs. At the end of the period, you should evaluate if your staff have done exceedingly well, need more support or if you need more staff.

You should also take the time every quarter to assess if the KPIs are still relevant to your business, goals and workload.

What Else You Need to Know About Key Performance Indicators

Firstly, you should acknowledge staff who outperform their KPIs. Acknowledging them could be by the way of promotion (when and if available), bonuses or awards. However, if people are underperforming, you need to consider if they have too much on their plate, if the KPIs are not achievable or if you need to provide more support or training to staff.

The most important thing to remember about key performance indicators is communicating clearly. Outline clearly what is expected to meet minimum requirements and how staff can seek help if they need it regarding their required work.

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