Identify the key result areas of your business. What are the results that your company, and your products or services, absolutely have to get to satisfy your customers?
Identify the key result areas of each person on your staff, including yourself. What do you absolutely, positively have to do in an excellent fashion to get the results that are expected of you? Once you have identified your personal key result areas, you must then set standards of performance in each area. How do you measure those results?
A key result area has three qualities: First, it is clear, specific, and measurable. Second, it is the sole responsibility of a single person; if that person does not do it, it will not be done by someone else. Third, a key result is an output of the job that becomes an input for the job of someone else. A key result area may be closing a sale. This result is specific and measurable. It is the responsibility of a particular salesperson. The sales order then becomes an input to the people who have to process the sale, produce the product or service, deliver or install it, bill for it, and service it afterwards.
In management, the innovation and development of new products and services is a key result area. It is something that must be done. It is measurable. It is usually under the authority of, or the responsibility of, a single person. Once it is complete, it becomes an input to the manufacturing, marketing, sales, and delivery functions of the business.
These are called “key result areas” because, if they are not done, and done well, in a timely fashion, they can lead to failure in a job or even in an entire company.
For example, a key result area is leadership. If a company does not have competent and committed leaders who are capable of making the right decisions and getting the job done in a timely fashion, the company will eventually go out of business.
Because key result areas are measurable, you can attach a standard of performance to each one. Even better, you can attach a standard of excellent performance to each one. How a person accomplishes his key result areas and the standards of performance he reaches becomes the basis for all rewards and promotion within the organization.
With key result areas and standards of performance, people know exactly what they are expected to do, and to what standard, and what rewards or consequences go along with successful performance. Ideally, everyone should know the key result areas and standards of performance of each coworker, and even the boss. This is the key to effective teamwork and concentrated effort.
Critical Success Factors
In every business, and in every part of the business, there are a few critical success factors or benchmarks that you can use to measure performance and results in each part of the organization at any time.
These measures can be as simple as daily sales volume, or they can be as complex as gross sales revenue per person employed in the company. One of the most important things you can do to help you concentrate your attention is to select the few critical success factors or measures that can most quickly and accurately give you a reading on the key parts of your business.
When I was developing real estate, I built a pizza restaurant in one of my shopping centers. The owner, a successful entrepreneur named Peter, had several restaurants in different parts of the city. Each time a pizza order was taken, it was written up on a sales slip that was put on a spike on top of the cash register. This was Peter’s critical success measure. He could walk into any restaurant, at any time of day and, by looking at the number of sales slips on the spike, he would have an immediate idea of how well the restaurant was doing that day.
What numbers go onto your spike? Most businesses focus on daily, weekly, and monthly sales. Many individuals focus on the amount they earn per week, month, or year. Successful entrepreneurs think in terms of how much they earn each day. The most successful people think in terms of how much they earn each hour. This becomes their benchmark for personal performance and financial results.
Your ability to select the correct critical success factors, and then to concentrate on improving those numbers, is a key responsibility of leadership. If the numbers you choose are the right ones for your business, a single number can reveal a lot about what is going on throughout the enterprise.