Leaders Need Vision, Managers Need Objectives and KPIs

Leaders Need Vision, Managers Need Objectives and KPIsWhat is management? Managers need to do many things, but clarifying business objectives, and deciding key performance indicators (KPI) to measure against those objectives, is crucial to effective performance management. It may, or may not, come as a surprise to you that many businesses in Ireland don’t document either of these. A company’s vision has to be supported by a clear set of objectives. Managers need to know how and why they reached some objectives, but failed to reach others. Maureen Grealish, director at LEAP, spent eight years in a business advisory role dealing with these very issues. Here she shares some of her insights into why business objectives and KPI’s are inextricably linked to your bottom line.

Maureen, in your experience how many businesses have their objectives clearly defined?
Most businesses don’t have any objectives, because they don’t realise the importance of it. There is a phrase ‘what gets measured gets managed.’ Sometimes people are taken up with the enormity of their tasks and they don’t realise that by focusing on 5 or 6 key things they can have a lot more impact on their business. Objectives are the 5 or 6 key things that they need to address in a given time period. That time period could be 6 months or a year, whatever the right time frame is for that particular business. But without that reference point you find that people are fire-fighting a lot, or business becomes very reactive. When they have an objective in place they have a target, and it helps them act in a more disciplined way. It also helps them measure how they’re doing as they go along so they know if they are on the right course or not.

So there are businesses operating without any set of objectives in place?
Yes because they don’t have a strategy. We ask people ‘what’s your vision for the business?’ If that’s your vision what’s your strategy for getting there? The objectives need to be linked to the strategy. So your strategy might be for a 5 year period. So let’s take the first year as a time frame. In order to achieve the vision, and thereby the strategy, what do you need to have achieved in that first time frame. And then the next time frame, and then the next. So the objectives should be seen as a set of milestones towards achieving the vision. But many businesses don’t have a vision, don’t have a strategy and don’t have objectives.

If they don’t have a set of objectives, what are they actually doing on a daily basis?
It depends. This is one of the big issues in business. They are essentially managing what’s in front of them. Some are managing their current customers, others are managing their current work rate, or they’re managing current staff but they don’t have an eye on the future. They might have an idea of where they want to get to but they’re not actively managing towards it. They’re almost hoping it will happen without actually steering themselves towards it.

How are objectives measured in terms of Key Performance Indicators?
If you have five or six key objectives you will have a measure for each one that makes sense to that particular objective. You generally have two financial based objectives, so you’ll have two financial KPIs. So for turnover you’re measurement will be a sales report. For a profit objective the measure would be your monthly managed accounts, the actual profit or loss figure.

For non-financial objectives you need to come up with a measure that makes more sense to that objective. Once you have developed the objectives the next thing you do is develop the measures for each one. For a customer service type of objective you may look at doing customer surveys, or mystery shoppers or you might do some kind of audit, where you score for a particular performance, and monitor that over a period of time to see that the action you are taking is making an improvement. It’s about picking a method that will measure the effect of an objective.

Give an example of a poorly thought out objective.
A poorly thought out objective would be ‘I’d like to increase sales.’ It doesn’t have any reference to how much you want to increase sales by, where you’re starting from or the time period where you want it to increase. So a better objective, when you’re looking at sales, would be to increase sales by 10{aa1e4c34c9c0f46e0a1f04e30c2eb1b9efaea7a47ed6ca6f324476e114da37f4} by Dec 2014. What you’re trying to do is establish a measure that will hit every element of the SMART acronym – specific, measurable, achievable, realistic and time bound. Until the objective can tick each one of those then you don’t have a good objective.

How can LEAP help managers and businesses with this critical issue?
We do it as part of an overall process. We need to see the wider context of what they’re trying to achieve in business. So we work with senior management initially to work out what the vision is for that business. Then they need to break that down into manageable chunks. So they may have a three year vision, but they need to focus on the first year. So in the first year what are the five or six key things they need to focus on in order to help them get closer to their vision?

What LEAP can do is help them with their vision. Agree on what the specific objectives are, and identify the measurements they will use. Help them agree on the timeline and implement the strategic plan. Help them monitor their performance, adjust their behaviour and achieve their vision. 

In interview with Des Kirby
How do measure performance in your business? Leave a comment in the box below. Thanks.

Maureen Grealish is a partner and director at LEAP.
Contact us if you’d like to discuss management issues affecting your business.

T: 091 755736
E: Maureen@leapleadership.ie
sonja@leapleadership.ie

Leadership Programme for Business Owners

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