M3 L3 Setting Objectives and KPIs
Summary
TLDRThis lesson focuses on crafting objectives aligned with an organization's vision and strategic pillars, and how to derive specific actions and key performance indicators (KPIs) from them. It explains the SMART criteria for setting objectives and distinguishes between leading and lagging KPIs. The script also illustrates how to cascade objectives through an organization, ensuring every team's efforts contribute to strategic goals. It emphasizes the importance of understanding the interdependencies of objectives and KPIs for maximum effectiveness, using examples from a coffee shop to clarify the concepts.
Takeaways
- đ Objectives should be aligned with the organization's vision and strategic pillars to ensure they contribute to the overall goals.
- đ Objectives must be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound to ensure clarity and attainability.
- đ KPIs (Key Performance Indicators) are essential for tracking the progress of objectives and should be chosen based on their direct relevance to the objectives.
- đ There are two types of KPIs: Leading KPIs predict future performance and allow for proactive action, while Lagging KPIs reflect past performance and provide results after the fact.
- đ Objectives should cascade from the highest level of the organization down to various levels, ensuring alignment and contribution to strategic goals.
- đ The process of cascading objectives is crucial for ensuring that every department and team member's efforts are directed towards the organization's overarching goals.
- đ Leading KPIs from lower levels can influence and impact the lagging KPIs at the top of the organization, creating a dynamic system of performance tracking.
- đ Establishing KPIs at different levels helps in monitoring the effectiveness of actions taken towards achieving strategic objectives.
- đ The interconnection of leading KPIs across departments can significantly influence the overall performance and success of strategic objectives.
- đ It's important to continuously monitor and review objectives and KPIs, using regular review meetings or dashboards with various metrics.
- đ The script encourages practice in creating objectives and KPIs to better understand the interdependencies and improve organizational performance.
Q & A
What are the key components of building objectives aligned with an organization's vision and strategic pillars?
-The key components include understanding the building blocks of an ideal organization, focusing on three strategic pillars, translating these pillars into specific actionable targets, and ensuring every team member understands what success looks like and what they need to focus on.
What does the acronym SMART stand for in the context of setting objectives?
-SMART stands for Specific, Measurable, Achievable, Relevant, and Time-bound, which are the criteria that objectives should meet to be effective.
How can an organization ensure that its objectives are aligned with its strategic pillars and overall vision?
-Organizations should set objectives at the highest level and then systematically break them down across various levels, ensuring alignment with the overall vision and operational goals.
What is the difference between leading and lagging Key Performance Indicators (KPIs)?
-Leading KPIs predict future performance and signal future events before they happen, allowing for direct actions to influence outcomes. Lagging KPIs reflect past performance and provide information about results after they have occurred.
How can an organization effectively cascade objectives throughout the organization and connect them with appropriate KPIs?
-By setting objectives at the highest level and then breaking them down across various levels, ensuring alignment with the overall vision and operational goals. KPIs at the top are often lagging and are influenced by leading KPIs from lower levels.
Can you provide an example of a SMART objective based on the script?
-An example of a SMART objective could be to reduce customer service response time from 24 to 12 hours within the next 6 months by implementing a new CRM system and training the customer service team.
What is the role of the IT and marketing department in improving customer service response time?
-The IT and marketing department would enhance the CRM's functionality, introduce new systems such as robotic process automations or chatbots, and track interaction times to improve customer service response time.
How does the HR department contribute to the strategic objective of reducing customer service response time?
-The HR department could focus on reducing employee churn, hiring new service employees, and developing training programs focused on communication and the use of the CRM system to handle cases more efficiently.
What is the significance of monitoring and reviewing objectives continuously in an organization?
-Continuous monitoring and review of objectives help ensure that the organization stays aligned with its strategic goals, allows for adjustments to be made as needed, and promotes operational excellence.
How can an organization track the effectiveness of its objectives and KPIs?
-Organizations can track effectiveness through regular review meetings, dashboards, and by using different targets and metrics to monitor progress towards objectives.
What is the importance of understanding the interdependencies of objectives and KPIs across different levels of an organization?
-Understanding interdependencies ensures that efforts are aligned and helps maximize results by recognizing how actions at one level can influence outcomes at another, contributing to the overall strategic goals.
Outlines
đ Strategic Objectives and KPIs for Organizational Excellence
This paragraph introduces the concept of aligning organizational objectives with a clear vision and strategic pillars. It emphasizes the importance of setting SMART objectives that are specific, measurable, achievable, relevant, and time-bound. The speaker explains how to convert strategic pillars into actionable targets and how to use KPIs to measure progress. The distinction between leading and lagging KPIs is highlighted, with leading KPIs predicting future performance and lagging KPIs reflecting past outcomes. An example is given to illustrate how to create a SMART objective from a strategic pillar, such as improving customer service response time by implementing a new CRM system.
đ Cascading Objectives and KPIs Across Departments
The second paragraph delves into the process of cascading objectives throughout an organization, ensuring that every department and team member's efforts contribute to strategic goals. It discusses how top-level lagging KPIs are influenced by leading KPIs from lower levels. Using the example of reducing customer service response time, the paragraph explains how objectives and KPIs can be broken down and tailored to different departments, such as service, IT, and HR. The importance of interconnecting leading KPIs to influence lagging KPIs is emphasized, showcasing how actions taken at the department level can collectively impact the organization's strategic objectives.
đ Implementing Objectives and KPIs in Practice
The final paragraph provides practical advice on implementing objectives and KPIs, suggesting that the complexity of the task may initially seem overwhelming but will become clearer with practice. It encourages the audience to define objectives and create KPIs for their organization, and to appreciate the interdependencies that exist between them. The paragraph uses a coffee shop example to illustrate how strategic objectives can be broken down into departmental objectives and how leading and lagging KPIs can be used to measure progress towards these objectives. It concludes with a reminder to monitor and review objectives continuously, and to seek support if needed.
Mindmap
Keywords
đĄStrategic Pillars
đĄSMART Objectives
đĄKPIs (Key Performance Indicators)
đĄLeading KPIs
đĄLagging KPIs
đĄOperational Excellence
đĄCascade Objectives
đĄCRM System
đĄInterdependencies
đĄOrganizational Structures
đĄValue Stream
Highlights
Building objectives aligned with vision and strategic pillars is crucial for an organization's success.
Objectives should be translated into specific, actionable targets to ensure every team member understands success criteria.
Objectives must be set at the highest level and cascaded down through the organization for alignment.
The SMART criteria for objectives includes being Specific, Measurable, Achievable, Relevant, and Time-bound.
Key Performance Indicators (KPIs) are essential for tracking progress towards objectives.
Leading KPIs predict future performance, while lagging KPIs reflect past performance.
Lagging KPIs are influenced by factors beyond direct control and require leading KPIs to drive changes.
Objectives must be broken down systematically across various levels to ensure alignment with overall vision and goals.
An example of a SMART objective is reducing customer service response time by implementing a new CRM system.
The cascading of objectives involves setting specific goals for different departments to contribute to strategic goals.
Interconnection of leading KPIs with lagging KPIs is vital for influencing outcomes and achieving strategic objectives.
The HR department's role in training and employee retention directly affects service team performance.
Lagging KPIs, such as customer satisfaction rate, are influenced by leading KPIs of training and system implementation.
Understanding the complexity and interdependencies of objectives and KPIs is key for organizational success.
A practical example from a coffee shop illustrates the application of objectives and KPIs in reducing order times.
Leading KPIs for the Barista might include the number of cups prepared per hour and operational task efficiency.
Continuous monitoring and review of objectives and KPIs are necessary for adapting and improving organizational performance.
Workbook activities for defining objectives and creating KPIs at different organizational levels are provided for practical application.
The importance of aligning efforts and understanding interdependencies for maximum results is emphasized.
The next lesson will focus on organizational structures as the third and final building block.
Transcripts
in this lesson let's look into building
objectives aligned with your vision and
strategic pillars and then how do you
create actions and kpis from them
remember for now you need to understand
what the building blocks are of an ideal
organization then you will start working
on your current organization by looking
first at the three strategic pillars
that focus on improving
it objectives translate your broad
strategic pillars into specific
actionable targets objectives ensure
that every team member understands what
success looks like and what they need to
focus on there are not just goals but
there are Milestones that indicate
progress towards operational
excellence objectives must be set at the
highest level of the organization and
then trickle down through its various
levels First Let Me Explain how to
create objectives and measure them using
kpis and then I will come back to this
part your objectives should meet the
smart criteria they should be specific
which means you must clearly Define what
you want to achieve including who is
involved where it will happen and why
it's
important measurable that means
establish con conrete criteria for
measuring progress and
success achievable you have to ensure
the objective is attainable with the
available
resources relevant you must ensure that
you align the objective with your
strategic pillars and overall vision and
finally time bound look into it that you
set a realistic deadline for achieving
the
objective now that you know what
objectives should look like I want you
to take one of your strategic pillars
focused on your current
operations convert it into a smart
objective for example if your strategic
pillar is improve customer service
response time a smart objective could be
reduce customer service response time
from 24 to 12 hours within the next 6
months by implementing a new CRM system
and training the customer service team
you see how this is specific
measurable achievable relevant and time
bound does it already want you to take
action once you have your objectives the
next step is to establish kpis key
performance
indicators these are metrics that help
you to track progress of your objectives
choosing the right kpis that are
directly related to your objectives
gives a clear indication of how well
targets are being
achieved there are two kinds of kpis we
can use leading kpis and lagging kpis
leading kpis are indicators that predict
future performance and indicate the
outcome they signal future events before
they happen and allow direct actions to
be taken to influence the outcomes
lagging kpis are indicators that reflect
past performance they provide
information about the results after they
have
occurred lagging kpis are influenced by
several factors often Beyond Direct
Control and require multiple leading
kpis to drive desired changes
effectively now let's explore how to
effectively Cascade objectives
throughout the organization and connect
them with appropriate
kpis objectives must be set at the
highest level of the organization and
then systematically broken down across
various levels ensuring alignment with
the overall vision
and operational
goals this process is essential because
it ensures that every department and
team members efforts contribute directly
towards achieving the overarching
Strategic goals kpis at the top of the
organization are often lagging kpis and
are directly influenced and dependent on
the leading kpis from lower levels in
the
organization we will take the earlier
smart objective that we created
reduce customer service response time
from 24 hours to 12 hours within the
next 6 months by implementing a new CRM
system and training the customer service
team the overall kpi to measure the
progress is the customer service
response time measured monthly to track
progress towards the 12-hour
goal here's how the objective can
Cascade down amongst the various
departments the service Department's
objective becomes to decrease the number
of customer interactions and to reduce
the amount of time it takes to solve the
problem by understanding the common
customer concerns that take the most
amount of time the CRM can be updated
with relevant information required to
solve this type of
concerns the it and marketing department
will have to enhance crm's functionality
to introduce new systems such as robotic
processes automations or chat Bots and
track interaction
times the HR department could look at
reducing the churn and hiring new
service employees to handle cases more
efficiently they could also develop and
deploy training focused on communication
and the use of the CRM
system now that the objective has
trickled down to the different
departments the next step is to
establish kpis at the different
levels for the service team a leading
kpi can be to track the change in the
average resolution time using the new
system
established another leading kpi can be
to track the number of customer
interactions needed for one question
for the HR department the leading kpi
can be to track the number of customer
service training sessions conducted and
the employee attendance rate these kpis
are actionable in the short term and
directly affect the success of the
Strategic objective while it is possible
to affect these leading kpis and take
actions to ensure their success it is
not possible to affect lagging
kpis however leading kpis affect lagging
kpis so by acting on these leading ones
the lagging ones can be influenced in
this context you cannot directly affect
the Strategic lagging kpis of Bringing
Down the response time to 12 hours
within 6
months however you can influence the
leading kpis of the service and HR
department that will directly affect the
lagging
kpi the leading kpis are also
interconnected with each other a better
performance of the HR kpis will most
likely lead to a decrease in the average
time taken to respond to queries because
the service team will be better
trained also the service it HR and other
departments will have lagging kpis of
their own for example a lagging kpi for
the service team can be the customer
satisfaction rate which can be measured
through follow-up surveys another one
could be the reduction in repeat
customer
concerns this will again be influenced
by Leading kpis of the HR department
such as how well and how often the
service staff are trained or from the IT
department how effectively the new CRM
system is implemented and how well the
sales team have been trained my goal
when explaining the interdependencies of
objectives and kpis across different
levels of the organization is to make
sure that you understand the complexity
when it comes to setting objectives and
kpis at different levels of your
organization you should align your
efforts when you are doing this and
ensure you understand the
interdependencies for maximum
results let's also take an example from
our coffee shop to reinforce the
learnings here for the coffee shop shop
a strategic objective is to reduce the
average we time for orders from 5
minutes to 3 minutes for all coffee
orders during peak hours and to do this
an additional espresso machine is
scheduled to be installed within the
next two
months the owner's objective here is to
ensure there's an investment in the
espresso machine which trickles to the
Barista
objective their objective is to adapt to
the new espresso machine machine as well
as to handle multiple machines while
maintaining coffee quality and ensuring
a higher output
speed the lagging kpi that can measure
the progress on this objective is
average customer we time during peak
hours this measures the effectiveness of
the workflow improvements and machine
additions at the end of a defined period
and is influenced by several factors the
leading kpis for the owner is to measure
average order preparation time this kpi
helps track how the new equipment
contributes to speeding up
fulfillment for the Barista the leading
kpi can be to measure the number of Cups
prepared per machine per hour and time
efficiency in managing operational tasks
like ingredient restocking and machine
cleaning do you see now how the kpi for
the owner is lagging while the kpi for
the Barista is
leading of course there will be multiple
objectives in a team and then the owner
or other staff can have leading kpis
that can have an effect on the leading
kpi of the Barista for example factors
such as Casher efficiency at processing
customers the influx of customers during
peak hours and logistical issues like
ingredient availability also affect the
leading kpis of the
Barista I'm sure you are a little
enlightened and also a bit
confused don't worry it will become
clearer to you once you sleep over it
when you practice creating objectives
and kpis for your organization you will
see these
interdependencies and appreciate our
efforts here more also I'm here to help
you if you have questions which you can
either bring to our coaching sessions or
post in the
Community now if you go to the workbook
you have the activity for this
module you will be defining the
objectives at different levels in your
organization that can help you to
fulfill the ideal value
stream once you have all your objectives
written down you will have to create
kpis both leading and lagging to measure
the
objectives once you have have defined
your objectives and written down the
kpis the last part of the exercise is to
list down the tasks and decisions needed
to meet the
objectives for each of the objectives
create a comprehensive list of tasks and
decisions that need to be made to be
able to deliver value to your customer
so far I've been using the word you when
describing setting objectives and kpis
but the depending on the size the
complexity and the nature of your
organization it could be just you or
somebody else beside you that is
responsible for creating these
objectives and kpis it could also be the
case that you are creating the
objectives and kpis for the overall
operations whereas the team members are
then further breaking it down into
smaller objectives and then kpis coming
back to this lesson after you have your
objectives and kpis it is important to
Monitor and review the objectives
continuously a simple way to do this is
to have regular review meetings but as
your organization develops then you will
have to start tracking this through
dashboards using different targets and
metrics in the next lesson we will look
into the third and final building block
organizational
structures I see you there
[Music]
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