Execution · Proving to Organising
Result KPIs and driver KPIs
You work back from a result to what your team needs to do every week, and choose the driver KPIs that predict that result.
Does this sound familiar?
- You look at revenue every month, and if it falls short, the month's already over.
- Your salesperson says it was a bad month. Nobody knows how many conversations he had.
- You set a higher revenue target, and what people do on Monday stays the same.
- Your driver KPIs have been green for months, and the result still lags behind.
Who it's for, and when
For founders and managers who track numbers but only see at the end of the month that things went wrong. In Proving you look for the first number that predicts your sales; your conversion rates are still an estimate at that point. In Organising, every process gets its result KPI with one or two driver KPIs under it, because you no longer see everything yourself.
The model
“While a lag measure tells you if you’ve achieved the goal, a lead measure tells you if you are likely to achieve the goal.”
A result KPI tracks what you want to achieve: revenue, new clients, delivery time. You only see it once it's happened. A driver KPI tracks what the team does to get that result: conversations, quotes, visits. It has to pass two tests. It predicts the result. And the team can move it this week by itself, without a client having to say yes.
You choose one by working backwards. Start with the result and write down the steps before it, with the conversion rate from your own numbers between each pair of steps: how many quotes become an order, how many conversations become a quote. Then you know how much of the first step you need each week. That first step, the one the team sets in motion itself, is usually your driver KPI. If one of the conversion rates is much lower than you thought, the work that improves it belongs next to it as a second driver KPI.
This lesson is about which numbers you choose. How you make them visible and go through them every week is in the lesson A scoreboard the team keeps up itself, and who owns which number is in the lesson An owner for every KPI.
Chris McChesney, Sean Covey and Jim Huling, The 4 Disciplines of Execution (2012), discipline 2: lag measures and lead measures. Published in Dutch as De 4 disciplines van uitvoering.
Result KPI
What you want to achieve. It comes in afterwards and you can't move it directly. One per process is enough.
Driver KPI
What the team does to get the result, tracked per week. One to three under each result KPI.
Predictive
When the driver KPI goes up, the result follows. Not sure? Look back: did the result move with this number over the past few months?
Within the team's control
The team moves the number itself. 'Quotes sent' passes that test, 'quotes signed' doesn't: the client has to sign, so that's a result.
Working backwards
The result divided by the value of one order, divided by each conversion rate, divided by the number of weeks. What comes out is the weekly target for your driver KPI.
Pitfalls
The number becomes the work
Set ten conversations a week as the target and you'll get ten conversations, including with people who'll never buy. So check every quarter whether the conversion rate held. If it drops, the team is hitting the number without getting the result.
A driver KPI per month
A driver KPI you track per month only tells you at the end of the month too. Track it per week and you can adjust while there's still time.
Watch and read
The man behind the model explains in six minutes why you steer by what your team does this week, and not only on the result afterwards.
Watch on YouTubeBezos in a minute and a half on the same distinction: profit and revenue are outcomes, and you focus on the numbers you control yourself.
Watch on YouTubeRead
The 4 Disciplines of Execution
Chris McChesney, Sean Covey, Jim Huling · 2012 · ISBN 9781451627053
Discipline 2, 'Act on the lead measures', is where the distinction in this lesson comes from. Practical, with lots of examples from real teams. Also published in Dutch as De 4 disciplines van uitvoering (Business Contact, ISBN 9789047006015).
View the bookApply it
- 1
Choose one result with a target
The result of one process that has to move this quarter, with a number: €300,000 in new revenue, delivery time down from five days to three.
- 2
Write down the steps before it
What happens before the result is there? In sales it's usually: first conversation, quote, order. In delivery: order in, picked, shipped.
- 3
Put the conversion rate between each pair of steps
Take it from your numbers for the past six months: how many from the previous step made it to the next? If you don't have those numbers, estimate and note that it's an estimate.
- 4
Work back to a weekly target
Divide the result by the conversion rates and by the number of weeks. Round up. That number is the target for your driver KPI.
- 5
Check after a quarter
If you hit the driver KPIs and the result still lagged, look at which conversion rate dropped. That number tells you what to do differently next quarter.
Examples
The maths: from revenue to conversations per week
Target: €300,000 in new revenue this quarter. Average order: €15,000, so you need 20 orders. 1 in 3 quotes becomes an order, so you need 60 quotes. 1 in 2 first conversations becomes a quote, so you need 120 conversations. A quarter has 13 weeks: 120 / 13 = 9.2, rounded up to 10 conversations a week. Driver KPI: first conversations per week, target 10. Second: quotes per week, target 5. What if quote to order goes from 1 in 3 to 1 in 2? Then 40 quotes and 80 conversations are enough, just over 6 a week. The conversion rate is a result in itself. The work that improves it, such as following up every quote by phone within two days, can become a driver KPI.
A software company
Result KPI: new clients per month. Driver KPIs: demos given per week, and trial accounts called in their first week. 'Website visitors' was dropped: visitors went up and clients didn't, so it didn't predict enough.
A wholesaler
Result KPI: delivery time in days, lower is better. Driver KPI: the share of orders picked the same day. The warehouse can work on that itself every day, and delivery time follows.
Do this in your own business
Everything up to here is free. What you fill in for your own business, you keep in Boldcaster.
- Go to the KPI Scoreboard. Choose Set up and use + Driver KPI to put a driver KPI under the result KPI it drives (under Belongs under result KPIs). Under Measure per, choose Week.
- You assign the lesson to your team and see who has done it.
- The quiz counts towards your progress, and you see which lesson comes next.
Four weeks free. You'll land straight in this lesson.
Quiz
6 situations. You need 5 of 6 right. You can try again at any time.
1.September's revenue is disappointing. You see it on 3 October. What would have shown you sooner that it was going wrong?
2.Your sales team suggests 'deals signed per week' as a driver KPI. What's the problem?
3.You want 24 new clients this quarter. 1 in 4 demos becomes a client, and half of the enquiries become a demo. How many enquiries do you need per week, over 13 weeks?
4.Your account manager hits his target of 100 emails sent every week. The number of new clients stays the same. What does that tell you?
5.A wholesaler wants to bring delivery time down. Which driver KPI fits best?
6.You raise next quarter's revenue target by twenty per cent. What else needs to happen?
Nothing is saved here. In the app, the quiz counts towards your progress.
Read next
- A scoreboard the team keeps up itself · You and your team set up a board with a few numbers they update themselves, and you open it at the start of the meeting every week.
- An owner for every KPI · Every number on your scoreboard has one name: someone who fills it in each period, explains what's going on when it's amber or red, and decides for themselves what to do about it.
Not sure where to start? Take the growth scan