There Are No One-Size-Fits-All Solutions

Key Takeaways:
  • Integrating key performance indicators with a strategic plan can greatly accelerate a company’s ability to enhance its operations and improve financial outcomes.
  • You need to find ways to analyze operational performance down to the lowest level possible.
  • The right strategic planning process, tailored to your business and accompanied by the right KPIs, will get you where you want to go.


Aligning key performance measurements with a strategic plan can significantly accelerate a company’s efforts to improve its operations and financial performance. But achieving that alignment is not a simple matter, and there are no one-size-fits-all solutions. Every company is different, and a deliberative process of creating a strategic plan and identifying the performance indicators that will help achieve its objectives requires input from company leaders and every department manager. 

Adams Brown’s Brett Henry, Principal, and Charlie Martin, Strategic Business Consultant, sat down to share insights about how the companies they work with go about aligning their key performance indicators (KPIs) with their strategic plans. 

Q: What are the factors in a company’s performance that typically lead an owner to put together a strategic plan, and how do they prepare for the process? 

A: The signs are often unmistakable. They may be seeing a decline in margins, or a spike in employee turnover. Maybe they’ve lost a couple of key customers. Or the company’s financial performance has been flat for several years – in which case, they’re losing money. These kinds of issues lead an owner to ask, “What will the company look like in six months? A year?” 

Sometimes, business owners feel paralyzed at this point. They know they need to make changes, but change is hard and sometimes it costs money. A conversation with key managers or trusted advisors can help break the logjam and get the strategic planning process moving. 

A strategic plan doesn’t need to be a huge long-range document. It can start out as a plan to make achievable improvements within the next six months, for example. Starting small and racking up some successes can help build excitement for more long-range planning, both for the owner and for key managers and department heads. 

Q: What are the key performance indicators that companies should measure to meet their strategic plans? 

A: That depends on the company’s goals. For instance, if the point of the strategic plan is to set the company on a path to grow 20% per year, how will that growth happen? One company may plan to grow organically, necessitating operational improvements and possibly additional staff. Another company will plan to grow by acquisition, meaning their strategic plan will focus on financing, searching for healthy companies to buy and integration of operations and staff. 

The KPIs also depend on the industry. One thing that is constant, though, is the need to get granular. Owners and managers need to find ways to analyze operational performance down to the lowest level possible. For instance, a manufacturer may analyze performance down to the machine level. If you spent $250,000 for a state-of-the-art piece of equipment two years ago, is that machine’s production contributing more revenue on a monthly basis than the debt service on the machine? Or not? 

Q: What kinds of financial metrics should be included in KPIs? 

A: The basic financial indicators must be measured, including cash flow, overall revenues, profitability and ROI, to name a few. Again, these measurements need to be as granular as possible. For instance, revenues can be measured by business segment, by location and by unit.  

Measuring expenses is a key factor, and this would include costs per unit, costs per machine, costs per business segment, etc. Understanding the impact of costs on the company’s overall performance is key. A company may have the latest and greatest technology available, but if it can’t afford to run it and can’t see any options for cost savings, the owner must look for ways to pay for it. Passing on the cost through the company’s pricing structure is an obvious first step. 

Looking at accounts receivable and aging reports is another key financial measurement. How many accounts are 60 days or 90 days past due? How are those delayed payments impacting cash flow? What can be done to bring receivables in on time? 

Q: Who should be involved in building a strategic plan and the KPIs that support it? 

A: The CEO, department heads and key managers from across the organization should work together to develop a strategic plan that will help the company reach its goals. The involvement of department heads is particularly important in identifying the KPIs that will support the plan because they know what happens on the front lines. They understand the nuances and pitfalls of the operational processes.

For example, the CEO may want to achieve a growth rate that would involve significantly higher output from the manufacturing equipment. The department heads may understand that the equipment is not capable of such output, and could offer alternative solutions – such as adding shifts – that would reach the same objective. The owner and other executives should welcome the involvement of frontline managers, even though their vision for the strategic plan may be challenged, because the managers can provide a dose of reality that would help craft a more realistic and achievable strategic plan. Getting alignment across the organization is crucial. 

Additionally, involving frontline managers in the planning process helps achieve buy-in, and avoids a scenario of a CEO imposing a unilaterally designed plan on the company. 

Q: How flexible should a strategic plan and its related KPIs be? 

A: That’s a delicate balance. You have to have the fortitude to stay with the plan, but you also have to check and adjust along the way. Things change in ways that can impact the relevance of the goals and objectives in your strategic plan. A new competitor arrives on the scene, or a new technology becomes available that affects how customers use your products. 

But even significant changes in the marketplace needn’t always compel a change in your strategic plan. Be cautious and consult with trusted advisors, as well as your internal leaders and managers, before changing direction. It’s hard to know what changes will occur in the marketplace over the next five years, but if you have the right strategy that is long-term in focus, the basis underlying the plan should still be right. An annual review of the plan and the KPIs is a good practice. 

Q: Do you ever find resistance to strategic planning and new KPIs in an organization? 

A: Yes. Change is hard. Company leaders are asking everyone to take a fundamental look at the path they’ve been on where they are comfortable, and trying to bring in new concepts, new models and new ideas. It’s important to get people on board with the reality that the tried-and-true methodology of the past may not work in the future. 

So resistance is not unusual, and leadership must gain consensus by being inclusive, asking for everyone’s input and making clear that hard questions are expected. 

“We’ve been doing it this way for 20 years” is not a business strategy. The path of least resistance is not a profitable path. 

Q: How would you summarize the importance of aligning KPIs with strategic planning?

A: It’s the old adage – if you don’t know where you’re going, any road will take you there. 

The right strategic planning process, tailored to your business and accompanied by the right KPIs, will get you where you want to go. You’ve got to build and measure things along the way to stay on track. You can use the knowledge you have about how your marketplace has changed in the past five to seven years to start putting some basic ideas in place about how you should make changes to prepare for the next five years. 

By measuring your performance (financial and operational) today, you will have the insight to how you reached your current position – good or bad.

If you would like to discuss strategic planning and meaningful key performance indicators for your company, contact an Adams Brown advisor.