M3 L3 Setting Objectives and KPIs

Summary

This 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

• 📈 Objectives should be aligned with the organization's vision and strategic pillars to ensure they contribute to the overall goals.
• 📋 Objectives must be SMART: Specific, Measurable, Achievable, Relevant, and Time-bound to ensure clarity and attainability.
• 🔍 KPIs (Key Performance Indicators) are essential for tracking the progress of objectives and should be chosen based on their direct relevance to the objectives.
• 🔑 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.
• 📊 Objectives should cascade from the highest level of the organization down to various levels, ensuring alignment and contribution to strategic goals.
• 🛠 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.
• 🔄 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.
• 🔑 Establishing KPIs at different levels helps in monitoring the effectiveness of actions taken towards achieving strategic objectives.
• 🔄 The interconnection of leading KPIs across departments can significantly influence the overall performance and success of strategic objectives.
• 📝 It's important to continuously monitor and review objectives and KPIs, using regular review meetings or dashboards with various metrics.
• 📚 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

00:00

📈 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.

05:01

🔍 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.

10:02

🚀 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.

Keywords

💡Strategic Pillars

Strategic pillars are the foundational elements that support an organization's strategy. They represent key areas of focus that align with the organization's vision and mission. In the video, they are used to translate broad strategic goals into specific, actionable objectives. For example, improving customer service response time is a strategic pillar that can be further developed into a SMART objective.

💡SMART Objectives

SMART objectives are a framework for setting goals that are Specific, Measurable, Achievable, Relevant, and Time-bound. The video emphasizes the importance of SMART objectives in ensuring that every team member understands what success looks like and what they need to focus on. An example from the script is reducing customer service response time from 24 to 12 hours within the next 6 months by implementing a new CRM system.

💡KPIs (Key Performance Indicators)

KPIs are metrics used to track progress towards objectives. They provide a quantifiable measure of performance. The video distinguishes between leading and lagging KPIs, with leading KPIs predicting future performance and lagging KPIs reflecting past performance. The script uses customer service response time as an example of a lagging KPI, while the number of customer service training sessions conducted is an example of a leading KPI.

💡Leading KPIs

Leading KPIs are predictive indicators that signal future outcomes and allow for actions to be taken to influence results. They are proactive measures that can directly affect the success of strategic objectives. In the script, the number of cups prepared per machine per hour by a barista is an example of a leading KPI, as it can influence the overall customer wait time.

💡Lagging KPIs

Lagging KPIs reflect past performance and provide information about results after they have occurred. They are influenced by multiple factors and are often beyond direct control. The video script uses the example of average customer wait time during peak hours as a lagging KPI, which is influenced by the leading KPIs of the barista and other factors such as cashier efficiency.

💡Operational Excellence

Operational excellence refers to the continuous improvement of business processes to achieve efficiency, quality, and customer satisfaction. The video script mentions objectives that indicate progress towards operational excellence, such as reducing customer service response time, which is a milestone in achieving operational excellence.

💡Cascade Objectives

Cascading objectives is the process of systematically breaking down strategic goals across various levels of an organization to ensure alignment with the overall vision and operational goals. The video script explains how objectives must be set at the highest level and then trickle down to ensure that every department and team member's efforts contribute to achieving strategic goals.

💡CRM System

A CRM (Customer Relationship Management) system is a technology solution used to manage a company's interactions with customers and potential customers. In the video, implementing a new CRM system is part of the strategy to reduce customer service response time, highlighting the importance of technology in achieving operational objectives.

💡Interdependencies

Interdependencies refer to the relationships between different elements within a system, where changes in one can affect others. The video script discusses how objectives and KPIs at different levels of the organization are interconnected, emphasizing the need to understand these relationships for maximum results.

💡Organizational Structures

Organizational structures define how responsibilities, authorities, and relationships are organized within an entity. The video script mentions that the next lesson will explore organizational structures as a building block, indicating their importance in aligning with strategic objectives and KPIs.

💡Value Stream

A value stream is the sequence of processes and activities that an organization undertakes to deliver value to the customer. The video script uses the term in the context of defining objectives at different levels to fulfill the ideal value stream, emphasizing the importance of aligning objectives with customer value.

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]