Strategy

How to link a company’s strategic goals with KPIs and projects?

Regardless of whether a company has documented strategic goals or not, it is certain that every company is implementing various projects and initiatives that help it take another step toward growth and value creation. This is because the most common method for entrepreneurs to achieve goals is through the gradual implementation of specific projects.

Below, we present several steps that can be considered and implemented to increase the effectiveness of a company’s achievement of business goals.

Define the company’s strategic goals

For many years, we have helped companies build business strategies. Often, the company’s management would openly state that they knew their strategy well but needed someone to write it down and present it in a “nice” way. It turns out that the “knowledge” of the strategy is often inconsistent.

A simple test can easily be conducted, where each member of the board is given 5 yellow sticky notes and asked to write down the five most important strategic goals of the company. Based on our experience, we can confidently say that these goals will usually differ.

So, how can we effectively implement a strategy when its understanding varies even at the board level? It’s worth writing down the company’s strategic goals, even in a very simple form, e.g., as shown in the diagram below.

Develop key performance indicators (KPIs) for strategic goals

The next step in good strategy implementation management is to develop performance indicators for the strategic goals. For each goal, it is worth designing a few KPIs. If we say we want to “dynamically enter the small business segment,” this is not immediately clear to everyone. KPIs help clarify what exactly is meant by this statement and what our aspirations are.

For example, for such a goal, we can create KPI 1 as the “Number of small businesses in the loyalty program” or KPI 2 as the “Number of small businesses that regularly repeat purchases.” This increasingly precisely defines our ambitions.

Each KPI should have an initial and target value that we strive to achieve during the strategy implementation period. For example, for KPI 2, the starting point might be 0 businesses that repeat purchases, but by 2022, our ambition is for 3,500 such businesses.

If we have KPIs and report them regularly, we will know how quickly and whether we are on track to achieve the strategic goal. Example KPIs for our strategic goals are shown in the diagram below.

Formulate specific strategic initiatives (projects) supporting each strategic goal

As we mentioned at the beginning, to achieve strategic goals at the level defined by KPIs, we need to formulate and implement specific strategic initiatives – projects.

Sometimes, a single project is enough to achieve a given goal, while in other cases, at least a few projects are needed. The connection between strategic goals, KPIs, and projects is shown in the diagram below.

Now, our strategy is quite precise. We know what goals we want to achieve, we know our specific aspirations (KPIs), and we know how we want to achieve them (projects).

Implement the above mechanisms in the organization’s Life

Of course, we first need to develop the goals, KPIs, and projects conceptually. However, for these to function in practice, it is worth supporting them with a good IT tool. The way a system can help the goals-KPI-projects concept will be demonstrated using the project management tool FlexiProject, developed by our team.

In this system, you can write and link strategic goals to projects, and also specify how much the projects support each strategic goal. With the help of FlexiProject, we can also check how much projects support each strategic goal and, finally, whether we are implementing projects that currently do not support any strategic goal.

In the above screenshot from the system, we see that the goal “Optimizing important business processes” has very strong project support, while, for example, the project “New SMS package” has low project support.

Another view from the system shows which KPIs have been formulated for each strategic goal and where we currently stand on the path to achieving the final parameter.

The following screenshot shows a specific strategic goal along with its assigned KPIs and projects.

What’s worth noting is that the KPI “Level of organizational satisfaction with the functioning of the Controlling Department,” assigned to the strategic goal “Improve the management reporting process and decision-making process,” is still at the initial level “3,” while the desired satisfaction level is 9. We also see that we have fully completed the “Leadership Development Program” project, while we are only one-third into the “Operational Reporting” project.

Our hypothesis is that the satisfaction level should increase if we complete the “Operational Reporting” project and conduct a survey. If it increases too little, we should propose further projects. Therefore, from a management and decision-making perspective, it is always valuable to concurrently monitor the goal, its KPIs, and the degree of completion of related projects.