5 Steps Toward Maximizing Effectiveness of Key Performance Indicators

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In January 2020, I wrote an article for AB titled, “In Decision-Making, Real Always Trumps Feel.” The premise is that better decisions are made when you use data and information rather than a “gut” feeling.

A powerful and essential way to get “real” is by using key performance indicators (KPIs) to set goals and measure performance. KPIs are a set of predetermined metrics that track and measure important aspects of your business, and are crucial for organizational success. They let you know what is working and where you need to make improvements.

When KPIs are thoughtfully crafted and implemented, they are a powerful driver for organizations. Here are five tips to help you maximize KPI usage and effectiveness.

1. Choosing KPIs

The first step in successfully using KPIs is to choose the right ones for your organization. There are some standard KPIs that most organizations track: profit margin, sales, retention percentage and revenue per member. Those are straightforward, easy to track and are always helpful in demonstrating the company’s performance.

There are also things you may want to track that are more specific to your organization.  Studios that are heavily class-based, for example, might use class attendance as one of their primary KPIs. Facilities relying on personal training revenue may track training penetration rate. Our club was all about member experience. We used net promoter score (NPS) as one of our primary KPIs. We checked it daily, reported it weekly and set goals to elevate it.

As you select appropriate KPIs for your business, decide what matters most; keep them relative to your vision, mission and values; and don’t be afraid to get creative with ways to track things.

2. Setting KPI goals

Once you have decided which KPIs to measure, the next step is to set goals. Part of setting goals goes back to the age-old concept of S.M.A.R.T. All KPIs (and goals in general) need to be specific, measurable, attainable, relevant and time-bound.

In addition, look at historic performance, recent trends in the facility, industry trends and benchmarks to help you set specifics. With our NPS KPI, we looked at what our current score was, what it was throughout the past year, and what the industry average was. Our score was 77 and the industry average was in the 40s. We were stagnant at 77 for a long time. By all standards it was a good score, but we knew we could do better. We made sure this was an ongoing KPI and set the goal of 80.

3. Communicating KPI objectives

How are team members supposed to do their best work if they don’t know how success is measured? Rallying your team around KPIs is a great way to bring everyone together to focus on common goals — a key to overall success. It is a reminder that every single person on the team, regardless of role, contributes to the bigger picture.

While most organizations have some KPIs, it is often only the high-level managers who are aware of them. I can’t stress enough the importance of sharing KPIs with the entire team. To share KPIs, take the same approach used to share any important information. Display them on walls in the employee break room. Mention them at meetings. Share them in emails. Post them on internal communication channels such as Facebook or Slack. Use diverse methods to share KPIs and do it frequently.

Let’s stick with our NPS KPI example. In addition to sharing via the methods mentioned, we put a huge poster in the office that read “Go to 80.” Our entire team saw the poster during every shift. We asked staff members to share their ideas on how to “Go to 80” by writing them on that poster. This cemented our commitment to the NPS KPI.

4. Celebrating KPI success

When KPI goals are reached, it is important to recognize success and celebrate it. This demonstrates to team members that their hard work and effort is appreciated, which leads to high levels of employee satisfaction and engagement, as well as even greater KPI buy-in. On the contrary, lack of recognition and praise leads to poor performance and disengagement.

Celebrating can come in the traditional form of raises and bonuses. If you hit the sales goal, you receive a bonus. While this is important, there are a lot of other ways to make sure your team feels appreciated. Recognizing achievements during meetings and in group emails is highly effective. Small inexpensive gifts and hand-written notes go a long way. Using internal communication channels to highlight performance makes a positive impact. Don’t forget how impactful face-to-face gratitude is. Take the time to pull team members aside and sincerely thank them in person.

With our “Go to 80” NPS KPI campaign, I emailed everyone on staff individually on New Year’s Day to thank them for the efforts that helped us “Go to 80.” In each email, I referenced the specific things that particular team member had done well. The response from staff was overwhelmingly positive.

You can never be too grateful or appreciative when it comes to celebrating KPIs.

5. Assessing and adjusting KPIs

It’s important to periodically assess and adjust KPIs if necessary.

What if the numbers aren’t where they need to be? In this case, the first step is to make sure calculations are correct. Second, make sure the KPIs were set appropriately. If everything else tracks as it should, you need to troubleshoot to figure out why your KPI is coming up short.

Thinking in “real” terms is critical as you go through the process. If you look at a sales journey, there are several steps: marketing, phone inquiry, walk-in prospect, the sale itself, and so on. Analyze each step. Are there enough leads? If not, maybe it is a marketing issue. If there are a lot of calls, but few appointments booked, the issue might be a lack of phone skills. Once you uncover the real problem, you can properly address it and get back on track with the KPI.

In addition, there may be times when a particular KPI outlives its relevance. I am pleased to report that our “Go to 80” KPI campaign worked! As a team, we elevated our NPS beyond 80 and kept it there. It was at that point that NPS was no longer a focal KPI for us, and we created new ones.

Organizations that successfully use KPIs assess them on a regular basis and make necessary adjustments.

These are the five main keys to using KPIs as a powerful, “real” tool to guide business, but here are a few additional thoughts to consider.

KPIs should motivate and empower team members, not scare them, so taking the time to set them thoughtfully and accurately is extremely important. Moreover, don’t set too many. From my experience as an operator and club consultant, five to 10 meaningful KPIs seem to be the sweet spot.

If you aren’t currently using KPIs, use the power of small steps and pick one or two to start. Once you are comfortable with that level of commitment, you can add more. As you set, apply and reset KPIs, you will see your organization soar to new heights.

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