You can't manage what you don't measure. The process of measuring and managing is easy if you do it with key performance indicators.
“Good grief! We're a community association, not a Fortune 500 Company.” It's what you might be thinking after you bumped into this article. But, since you're here and reading, it's safe to say you're curious to understand the connection. It's a strong connection, and it can be extremely valuable to any board that implements the practice of running a successful association.
In our other articles and eBook, you've read that board members treat running a successful community association like running a business. And, as Peter Drucker says, “You can't manage when you don't measure.” The process of measuring and managing is easy if you do it with key performance indicators. Here's what you need to know about KPIs.
A break-it-down definition
In our eBook, we offer this definition of a key performance indicator (KPI). We call it a measurable value that demonstrates how effectively an organization is achieving key business objectives.
And, while it sounds like an undertaking for big companies, organizations of all sizes use KPIs to evaluate their progress at reaching targets or goals. Measuring your KPIs is like taking your pulse. It's a way to keep track of the vital signals which tell you if your business is functioning according to plan.
How do you pick these vital signals? Let's explore this by looking closer at the three words making up the KPI acronym:
- Key: There are plenty of things you can measure that might tell you about the progress your association makes, but which are important or vital? Start with a manageable number of key measurements. We recommend starting with three to seven of them.
- Performance: If you drive a vehicle that uses gasoline or diesel fuel, you could measure how well it's functioning by miles per gallon. If that number starts to drop, you know you have a problem. It's probably not the fuel – and you'll have plenty of additional things to check – but this key measurement of performance gave you the heads-up warning.
- Indicator: The closest dictionary will tell you this is a sign giving information which draws attention to a condition. Lower gas mileage indicates a problem with your engine. The most efficient indicators are pieces of objective data that are not open to interpretation. It's why most KPIs are usually numbering.
More on indicators
Few companies have the ability to use real-time KPIs. For the most part, key performance indicators are what we like to call “rear view” tools. They are historical in nature. You won't know your KPI attached to association dues until the end of the month. The term for this is a lagging indicator.
At the opposite side of the indicator, spectrum are leading indicators. These are measurements of proactive steps leading to performance. In the case of association dues, a related leading indicator might be the number of communications to a resident with a history of delinquent payments to remind them of an upcoming association payment deadline.
An optimal collection of KPIs uses a mix of these two types of indicators. Follow this link to request a copy of our free eBook if you would like to see examples of KPIs for your board, the community, and your financial performance.
Putting KPIs to work
Deciding what to measure and collecting the data are only the initial steps. The final and most important step is to make decisions based on what your KPIs tell you. There are five key things you must do to make this happen.
- Get buy-in: People seldom participate in programs they didn't help to assemble. Can you involve key individuals in making decisions on what to measure? A group sense of ownership and accountability will help move your KPI initiative toward successful adoption.
- Agree on what's to be measured: There's nothing wrong with deciding you will have a KPI about satisfaction – as long as you agree to upfront about how this indicator will be measured objectively. Likewise, it's important to assign the responsibility of measuring each KPI.
- Share the results: Information not shared is information wasted. Information not acted upon is even worse.
- Incentivize behaviors that drive your KPIs: In our eBook, we spend some time explaining the difference between a reward and a kickback. The best way to drive positive KPI results is to reward the behaviors which produce positive results. Businesses don't set goals to reward managers or employees. They set them to increase performance.
- Revisit and revise: KPIs are only effective if they help you measure what you want to improve. Change those that aren't helping you run your association like a business.
Successful boards run community associations no differently than the C-suite of a Fortune 500 company runs a business. It's an objective measurement of performance data. Setting up KPIs for your community association can be a powerful step forward for productivity and performance.