Choosing Key Drivers
So how would you choose your key drivers for your business? What matters to your business to make you successful? How do you out-compete similar businesses? Make sure each key driver:
- affects performance
- is measurable
- compares to a standard
- can be acted upon
For example, if you're a farmer you might say that weather vastly affects the health and number of crops. You can measure how many days you got rain or sun and compare it to last year's standard. However, you can't change the weather, so that would not be a good key driver. You might choose irrigation instead, which you can increase or decrease.
Employee hours might not be a good driver either. A company does not need to track the hours of salaried managers, as it does not directly correlate with performance.
Key drivers can be created from the company's own history or industry standards. If you run a hotel, what did you make last year? How much did other hotels make?
Key Driver Examples
Now that we understand more about what key drivers are and how to choose them, let's take a look at a few examples.
Location
Where an internet content writer works isn't going to affect their business, but something like a Starbucks relies heavily on their locations being convenient for customers. Location is a key factor for most retail stores.
Customer satisfaction
A hotel can't survive without a good reputation and pleased customers. They might look at overall customer satisfaction. A company that delivers products might look at customer satisfaction of delivery time.
Costs
Cost-efficiency compared year over year can impact business. A baker whose ingredients get more and more expensive will affect the price they pass on to customers, and therefore they may need to find other suppliers.
Teams
Key drivers could include employee satisfaction, employee turnover, and employee engagement. If a sales company notices that their long-time employees make 60% more sales than their new recruits, turnover could be a key driver for them. They might consider investing in incentives for employees to stay long-term.
Profitability and revenue
Key drivers include profitability year over year and revenue compared to industry standards. For example, hotels compare their average daily rate to hotels in the area on a report that is sent out each week.
Using Key Drivers
Once you've established key drivers for your company, you need to make sure you do a couple of things.
- If you've picked too many key drivers, reduce them. Most companies choose no more than five. More can be hard to monitor and track results.
- Communicate the key drivers to your teams. They need to know what you are looking at and measuring them on.
- Monitor your key drivers and act on the feedback if necessary.
Lesson Summary
Businesses use many different ways to measure their performance. Key drivers are leading factors that have a big impact on business performance. They should affect success, be measurable, be comparable to a standard, and be able to be acted upon. Examples of key drivers include location, customer satisfaction, performance relating to costs, employee engagement or turnover, and profitability. Companies should only pick a few key drivers, communicate them to staff, and monitor them.
