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Aligning Priorities to Business Objectives



The first and most important point with business priorities is that they are clearly aligned to the longer term business objectives or vision.


It is important to have very clear business priorities that are well understood by everyone, not just manages and leaders. They would tend to be set on a rolling 12 monthly basis, as naturally things change and so priorities should change as you become more flexible and adapt to an ever volatile business environment.


They should be well thought out and be realistic so everyone feels they have a chance of achieving them, even if they are a challenge and are stretching.


Well thought-out strategic business priorities should give you:


  • A SET OF KEY TARGETS

  • LASER FOCUS

  • KEY PERFORMANCE INDICATORS TO MEASURE PROGRESS


Let's look at each of these in a bit more detail:



TARGETS


Targets are important as it gives you something to aim for and it can be motivational and aspirational. You need to know what you are going to be measured against - and without targets this obviously can't happen.


The acronym SMART targets is a good way to guide you through key elements to consider when deciding targets.This is a well known tool which is commonly attributed to Peter Drucker’s ‘Management of Objectives’.


S

Specific

Simple, sensible and significant and within appropriate boundaries.

M

Measurable

Meaningful and motivating. You need to be able to measure whether or not you have achieved your objective (use a benchmark if possible).

A

Achievable

Agreed and attainable with buy-in from your team on ‘what you want to do’ before any work begins on ‘how to do it’.

R

Realistic

Reasonable, relevant, resourced, and results-based. Can you achieve them within the timeframe, budget and business context?

T

Timely

Time-based, time limited, time/cost limited and time sensitive. Should also have timely key milestones.


 


FOCUS


There is a saying that goes . . .


"You get what you focus on".



You have to have something to focus on more than other things. If everything is important then it really means . . . actually nothing is that important! So shared understanding and clarity about the group, team or organisational focus is crucial.


Clear priorities and 'real' focus is an absolute MUST. Remember, you will get what you focus on. Focus drives actions and actions will drive performance.



 


MEASUREMENT


The well known saying "what gets measured, gets done", pretty much says it all really. As in, if you don't measure, you won't know what to do. And once you measure it, it becomes more difficult to ignore it, or encourages you to at least try to do something positive about it.


Deciding and setting relevant measurement indicators or KPIs (Key Performance Indicators) that you can review frequently in a structured way will also bring many business benefits, such as:


  • Gives insight to where you are against plan & shows any potential negative trends

  • Ensures potential shortfalls can be controlled and limited by appropriate actions

  • Enables everyone to understand the ‘real’ situation to provoke a shared responsibility

  • Encourages a collaborative approach to finding a solution

  • Gives opportunity to evaluate the initial plan on a regular basis and make necessary changes as appropriate


You should also consider:


  • Automation so it is efficient and accurate

  • The use of visual management

  • A flexible & adaptable approach

  • What are the 'leading' KPIs

  • What are the 'trailing' KPIs


What gets measured, gets done!


Leading and Trailing KPIs


Leading and trailing (or lagging) KPI's or indicators help leaders and managers understand business conditions and trends. They are metrics that inform managers that they are on track to meet their priorities, goals, targets and objectives.

LEADING KPI

TRAILING KPI

Leading KPIs are used to predict changes or trends, as well as forward looking and help to manage the performance of a system or process.

Trailing KPIs measure the result of the performance and are factual after the event. They can also be used to confirm long-term trends.

Example of leading KPIs for a companies future growth . . .

Examples of trailing KPIs could include the following . . .

  • Growth in Sales Pipeline

  • % Growth in New Markets

  • Number of New Patents

  • The Number of New Website Trials

  • Number of Unique Website Views

  • Annual Sales

  • Growth in Annual Sales

  • Gross Margin

  • EBITDA

  • Annual Net Income


Leading indicators


Leading indicators are sometimes described as 'inputs'. They define what actions are necessary to achieve your goals with measurable outcomes. They “lead” to successfully meeting overall business objectives, which is why they are called “leading”.


A leading indicator encourages business stakeholders to consider:


  • What processes can I employ to achieve this goal or improved performance?

  • What skills can the team improve to better achieve the desired outcome?

  • What steps can be taken to speed up product development and efficiency?


Leading indicators do this by providing benchmarks that, if met, will be indicative of meeting overall KPIs and objectives. Some examples of leading indicators for an enterprise business software company with an annual subscription fee might be:


  • Percent of customers that sign up for two-year agreements

  • Number of customers that renew software at or before mid-term alerts

  • Number of customers that purchase software add-ons


Trailing indicators (also known as 'lagging' KPIs)


If a leading indicator informs business leaders of how to produce desired results, a trailing indicator measures current production, service or performance. While a leading indicator is dynamic but difficult to measure, a trailing indicator is easy to measure but harder to change. They are opposites, and as such a trailing indicator is sometimes compared to an output metric.


A trailing indicator encourages business stakeholders, for example, to ask:


  • How many people attended an event?

  • How much product was produced in a given time?

  • What response or feedback did it receive?

  • Have we achieved the objective or hit our target?


Trailing indicators measure output that’s already occurred to gain insight on future success. They do this by measuring things like:


  • Profit

  • Expenses

  • Customer participation

  • Renewal rates

  • Revenue





As you explore and consider your leading and trailing KPI's, ask yourself the question - is this predictive in nature and does it have a possibility of predicting the future?


Valuable KPI’s have the closest correlation to predicting the future. Effective leaders should then, in collaboration, find the specific levers to improve those KPI’s which will in turn improve the company’s performance across key business domains of QCD (Quality, Cost and Delivery).


Ultimately you need to determine and understand the difference between leading and trailing KPI's for your business, to ensure that you have a healthy mix between the two types of measures, when it comes to measuring and improving your focus areas.



Article by Trevor Norman


Trevor is a leadership coach and cognitive behavioural therapist and specialises in organisational behavioural analytics and team dynamics.






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