How to use indicators in order to accomplish objectives and evaluate the strategy

When an entrepreneur decides to create a business one of the first things in which he has to think is the strategy. With a correct strategy he will achieve a competitive advantage with actions that protrude the company’s potential and in this way the business will achieve its objectives and goals. However in some occasions entrepreneurs decide to talk about strategy without talking about indicators. This is a huge mistake because a strategy tries to conquer objectives and in order to do this it is necessary to constantly measure the advance in the procurement of these objectives. If the objectives are not being achieved the strategy must be changed, but the entrepreneur will only know this if he has indicators that tells him how is the strategy working.

So it is very important that entrepreneurs and their team determine performance indicators. In this post I will explain the general methodology to create indicators that measure the success of our strategy in order to achieve the entrepreneurship objectives.

Thus the first thing we must define is what are we going to measure. For example if our goal is to increase the monthly sales in more than a 20% it is clear that we should measure the increase of the number of sales that month compared to last month. Once we have defined the indicator we are going to measure, we must determine the way it is going to be measured. This includes the equation, but also other things such as periodicity, information sources, presentation of the information and the employee that will be in charged of these measurements. In addition to this, the indicator ranges must de determined. In the example I presented, a growth between 0% and 15% will de red, between 15% and 20% will be yellow and more than 20% will be green.

What I just mentioned must be done with all the objectives we want to achieve; at least one indicator per objective. All of the indicators must be frequently revised. According to the colors of the example, if we see that our indicator is red or yellow, we must analyze and change something on our strategy. In this case the indicator is telling us that the actions we have undertaken are not resulting in what we expected. In the case in which the indicator is in green means the strategy is working but if it maintains in this color we should check if it is possible to increase the exigency.

In this way remember that indicators are very important in order to know if our strategy is helping us to achieve our goals. Also remember that the methodology to determine indicators is very simple but we can get a lot of information from them.

Image taken from Flickr.com

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