6 Steps to Better Business Metrics

The great 19th-century physicist Lord Kelvin once said, “If you cannot measure it, you cannot improve it.” It’s the O.G. edition of the “measure it – manage it” mantra that many successful businesses embrace in their pursuits of excellence. Most of us are familiar with how using metrics or key performance indicators (KPIs) can keep us on track and progressing towards goals and objectives that we’ve set.

The trick to the best use of KPIs is two-fold: they should be both predictive and relevant. I’ve seen companies go completely overboard with measuring every single aspect of their enterprise; this actually hurts more than it helps (tip: don’t ignore what the ‘k’ in “KPI” stands for). Thus, the challenge for business leaders is how to identify the best KPIs to use, not all the KPIs to use.

Futurist and thought leader Bernard Marr has a compelling solution to help us develop better and more meaningful KPIs: Start asking Key Performance Questions. A KPQ is a management question that encapsulates exactly what we need to know when it comes to each of our strategic goals.

KPQs put our attention first on what needs to be discussed when reviewing performance, which then informs the most meaningful performance indicators to collect. Good KPQs puts the performance data we’re gathering into context, which naturally helps with communication and decision making.

Lucky for us, Dr. Marr has developed six simple steps for developing more useful and relevant KPQs in our pursuits of the right KPIs.

1. Start with strategy.

KPQs come from your business strategy, which ideally is summarized in writing in a clear and concise way that everyone in your organization can easily understand. Warning: KPQs won’t work nearly as well for you if you don’t have this in some form.

For each strategic objective, shoot for between one and three KPQs. Fewer is better here, because every KPQ will trigger at least one KPI, and you don’t want to end up with a boatload of KPIs that creates a data-collection nightmare.

Ask yourself, What is it you need to know about each objective in order to make better informed decisions?

2. Engage your people in KPQ development

This is a great opportunity to involve a wider group of people in the execution of your business. Include the people who are closely involved in each process that contributes to an objective and ask them what kinds of questions they’d be asking to get after what’s most relevant. Then bring those questions back to the functional experts for each objective for refinement. Getting more people involved helps greatly with both alignment and ownership.

3. Make KPQs into open-ended questions.

Closed-ended questions can be answered with a yes, a no, or a simple fact. They’re easy to answer, don’t usually invite much thought or reflection, and often start with Where, When, or How Many. Some examples:

  • Where did you go on vacation this summer?
  • Is this important to you?
  • Have we met the budget?

In contrast, open-ended questions are way better. They invite thinking and opinions, feelings and reflection. These are truly curious questions and usually start with What, How, and sometimes Why. Here are some examples of better open-ended questions, based on the closed-ended questions above:

  • What inspired you to go to Cancun for vacation this summer?
  • Why is this important to you?
  • How well are we managing our budget?

Open-ended questions elicit a wider exploration, engage the brains in the room much more, and invite more discussion. KPQs should be open-ended whenever possible.

4. Focus your KPQs on the present and the future.

This step highlights the difference between leading and lagging indicators. Avoid questions that address the past, because we can’t do anything about what’s already happened. “To what extend are we increasing our market share?” is much more powerful than “Did we increase our market share?” The answers to each of those will point you to very different KPIs.

5. Keep your KPQs short and clear.

A KPQ should only contain one question, and the language of it should be simple, clear, and brief. Try to avoid jargon, acronyms, and management buzz words so that the question is easy to understand.

6. Refine your KPQs by using them.

With good KPQs you’ll begin to see just how well the KPIs you’ve selected are answering them. More importantly, however, you’ll also see how well the KPQs help your team have better discussions and make more informed decisions. Improve your KPQs with starting phrases like “How well…” and “To what extent….”

In the words of the French philosopher Voltaire, “Judge a man by his questions rather than by his answers.” The challenge today is not to find more business metrics but rather to zero in on the Vital Few that are most meaningful and relevant for your business. Using KPQs to develop your KPIs will ensure that you know what you need to know, when you need to know it, to run a great business.

Thanks for reading!

Hi, I'm Kurt Greene, owner of Arrow G Consulting. I also lead CEO/executive peer groups in Knoxville for Vistage.

When I’m not helping CEOs and senior leaders to improve themselves and their companies, you can find me re-arranging the stack of unread books on my nightstand, daydreaming about airplanes, and seriously thinking about getting the ol' college rock band back together. Learn more about the exciting work we're doing here at Arrow G Consulting HERE.