“What if I’m wrong?” is the big question that keeps executives up at night.
As CEOs manage, direct, and lead their companies to success, they are responsible to make the right decisions so their teams can produce the right outcomes. In other words, their ultimate role is to be a good decision-maker.
Historically, the tools in a business leader’s decision-making arsenal included: gut feelings, probability models, past experience, and a lot of hoping for the best. Now, however, we have much better tools to empower good decisions and great leadership: data and, more specifically, key performance indicators (KPIs).
Using your business data to create key performance indicators is a critical step on the path to success. The fact is, better information leads to better decisions, and better decisions lead to better results. KPIs, then, are an invaluable resource in helping your company succeed because they give you the insight you need to make informed decisions and set strategic goals.
Leaders who use data proactively are said to be data-driven. Data-driven leaders use advanced data analysis tools like business intelligence (BI) to “magnify their knowledge and help close the probability gap between guessing and knowing” (Futurum Research). In other words, they take advantage of technology that helps them make better business decisions—because they know that ignorance isn’t bliss.
No matter your leadership skills, KPIs can help you improve. As we’ve explained, a key aspect of great leadership is to make good decisions. KPIs help you make better decisions both for your company as a whole and in individual employee relationships. Here are four ways you can use KPIs to be a better leader:
It may be obvious, but having better access to data gives companies a strategic advantage over competitors. One advantage of using KPIs is how they enable you to capture and capitalize on opportunities.
As an ecommerce and brick-and-mortar retail company, Homage relies on their sales KPIs to monitor product trends. Their management team uses this data to predict future sales, plan marketing promotions, and optimize discount campaigns so that they can maximize their profits.
Similarly, the executive team of The Feel Good Lab use their website performance dashboard to quickly see what’s working and what isn’t, so they know how to keep their business moving in the right direction. "We want to make sure we always have our foot on the pedal," explains co-founder CJ Forse.
A key element of putting your KPIs on a dashboard in real time is that it makes everything visual. Unlike spreadsheets where every success or failure is just a number in a cell, executive KPI dashboards show those peaks and valleys clearly. What this means for you is that you can quickly see when problems arise. You don’t have to wait around for IT to compile a report (at which point the problem may have escalated beyond a quick fix). Instead, you can respond promptly to correct your course.
MachMotion uses their sales projection dashboard to reduce lost opportunities. The sales team can see when the finance team sends out a quote, allowing them to follow up quickly with prospects instead of letting the deal fall into limbo.
Being a good leader isn’t just about inspiring people to do better—it’s about empowering them to shape their own destiny. Just as data and KPIs give you better information to make decisions in your role, employees can use key metrics to inform their day-to-day efforts as well.
Powerblanket uses Grow dashboards to help his employees stay on track. Because they can see their performance reflected in the data, they know when to adjust their work, and “everyone is empowered to make the company better.”
KPIs also help keep people accountable for their work. They know what’s expected of them, and they naturally align their efforts to meet that standard. As Powerblanket CEO Brent Reddekopp says, “You get what you measure.”
One of the most important parts of using KPIs is how they can impact company culture, both at the team and individual level.
Key performance indicators ensure that expectations are clear. For employees, this means they don’t have to guess at how well they’re doing. They can be confident in the results they see in the data. Leaders also enjoy the benefits of mutually understood expectations, as well as diffusing some of the tension of evaluating an individual’s performance. Rather than playing an oppositional role, you can work alongside employees to solve problems using the data as your guide.
When KPIs are shared visually throughout your company, they can have a huge boost on morale. It’s a great feeling to come together around a TV dashboard and watch your chart update as you hit an important goal. In addition to monitoring progress towards team objectives, Myagi uses their Grow dashboards to identify and circulate wins throughout their company to get employees excited about their success.
It’s a simple truth: You are always leading by example, like it or not. So if you want your company to develop a data-driven culture, you have to embody it yourself. You have to use the tools, discuss your KPIs frequently, hold people accountable, and evangelize the value of data. Employees intuitively understand what is important to you, and if you prioritize your KPIs, they will follow where you lead.