Two important parts of the Balanced Scorecard are an action plan and KPIs. Both are supposed to be aligned with strategic objectives to ensure driving business success.
How can you determine the specific targets for your KPIs and what it is which actually stands behind these numbers? I decided to analyze this process in detail to show a global picture.
Here we have several options:
- Zero-target. You have some specific strategic objective, for example “To be a recognized expert in the ABC business niche.” But you don’t have any specific information about what works and what doesn’t. As a result you cannot say that you need to write 10 books on your topic or you need to make 100 posts in a professional forum. You have no idea about measuring your target so you use some numbers from your head. We start from zero, so let’s call this “zero target.”
Hopefully, you could quickly convert zero-target into something tangible.
- Benchmarks. If you don’t have expertise in something it doesn’t matter that someone else doesn’t have it either. You can use industry standard targets, called benchmarks. You ask some business with similar tasks about their targets and current values and set your numbers accordingly.
- Experience. Target according to your experience. If you worked in the business for a long time you have better prognosis abilities. You can foresee what number of partners you need to have in a certain region or what funds you need to invest in marketing to achieve a certain goal. You can set targets according to your experience or the historical values of your business.
I assume that now you have some target and now let’s play a conversion game:
- As an experienced manager you understand that behind 2 closed deals actually stand 20 qualified leads and behind these leads stand 200 visitors of your website who signed up with your free teaching course and before getting to your marketing funnel there were 5,000 on your website.
And even more potential clients could be searching for your website in search engines. Nearly any business objective is a combination of smaller steps with an average conversion ratio for each step.
You might take several hours of time, add resources, add a workforce and convert all this with certain effectiveness into the wished for results.
There is never just a “target” value. Something always stands behind it.
Advanced target management
We are getting to the advanced target management. Now we know that there are certain numbers that are converted with a certain ratio into target value. It means that having one target value we actually have 2 sub goals:
- Work on numbers
- Work on conversion
Remember the difference between spending and investment that was taught by Robert Kiyosaki in his books? I would say that working on conversion is an investment in most cases.
Update your goals
- Get a list of the most important conversion ratios in your business.
- Find ones where change in the conversion ratio will make a difference to your business.
- Add to your strategic objectives the goal to work on improvement of certain conversion ratios.
This is as important as working on the target values of your KPIs.