The Two Crucial Goals: KPI, KGI

Hi there!

What do you plan to do to achieve a big goal?

Every company has a necessary goal to achieve. I’ll illustrate the ways that companies can achieve a big goal.

Divide a big goal into small details to take action

The other day, I participated in a seminar given by a former Olympic swimmer. At that seminar, I was impressed by the following message given to children dreaming of becoming Olympic athletes.

“Even though your goal is now vague and dreamy, try to break it down into small goals so that you can achieve it – for example, setting a record to break for the next tournament or setting a record you want to achieve in each grade of school. After all, every day will end up being an important day when working towards a big goal, and you will be aware of the importance of practicing each day.”

“Let’s divide a big goal into small details and motivate yourself to act based on it”

The matrix below is a famous method for achieving a goal made by Shohei Ohtani, a major league baseball player. It is categorized in an easy-to-understand manner such as ultimate goals, subdivided goals, and daily actions.

As you can see in the figure above, if you divide the main goal into smaller details, you can prepare for them and motivate yourself to act based on them without hesitation, whereas it is difficult to imagine the actions that you should take when considering only a big goal.

However, these methods are not only athletic but also relevant to everyday actions.

KGI: the Ultimate Goal

In business the ultimate goal that organizations and companies should achieve is called KGI: an abbreviation of “Key Goal Indicator” and it is a quantitative indicator. You define the indicators, and what level those indicators must reach to accomplish your goal.

Abstract principles and objectives that cannot be quantified and are not easy-to-understand aren’t used because they are not appropriate as KGI. This is because it is difficult for people who have different values to share goals and to determine from their different perspectives whether they have achieved them compared with outcomes. The goal that you would like the company or the organization to aim for must be clear. In order to achieve that you should set a numerical goal and its deadline.

KGI is a long-term and final goal that companies and organizations should achieve. However, by merely setting KGI things that should be done in daily operations are vague. Therefore, in order to reach the ultimate goal an intermediate goal (KPI) to achieve the KGI should be defined as a preceding step.

KPI that properly deconstructs the ultimate goal

KPI is an abbreviation of “Key Performance Indicator”.

It is an indicator that represents an intermediate goal as a preceding step in order to reach the ultimate goal in an organization such as a company. In other words, first clarify the final goal, KGI, and then break it down appropriately to set the intermediate goals, KPI. Then determine the means to reach the divided intermediate goals, and act. The KPIs are used to regularly monitor progress and to confirm whether or not you are heading towards the goal correctly.

Although there are various processes to achieve the goal, setting the target numerical value in each step will make it easier to ascertain when the goal is reached.

KGI is set as a long term goal from 1 year to 5 years on average, whereas KPI is set using numerical values ​​that can be obtained in a short period of time. Specifically, I will show the following example of an online shop that sells accessories in which the relationship between KGI, KPI, and the means are illustrated.

KPIs are set by specific numerical values because it would be difficult to imagine the steps that should be taken merely with the ultimate goal.

Then, the steps to be taken become clear and you can act without hesitation. In addition, sharing KPI with your team can help you to unify your attitude towards the goal. Furthermore, it is possible to foster a common standard of evaluation.

However, if you set KPI in the wrong way the means for achieving KPI will be wrong as well. You need to be careful about this as it will be counterproductive to the ultimate goal.

Using KGI and KPI as a milestone for business improvement

Setting KGI and KPI and proceeding based on them will be a subject for business improvement. Actually you can promote business improvement in the following flow.

The setting of KGI

  • Enables you to determine success or failure・・・1
  • Enables you to set KPI・・・2

The setting of KPI

  • Enables you to check if the means are correct・・・3
  • Enables you to check if the KPI itself is correct・・・4

First of all, setting KGI helps

1. To determine what is a success or a failure

For example, even if you sell goods worth 10 million yen a year at an online shop you wouldn’t be aware of success or failure without KGI. In other words, that doesn’t afford you an opportunity to determine whether the business needs to be improved.

2. To set KPI

By setting an intermediate goal (KPI) appropriately to achieve the ultimate goal (KGI) it allows you to clarify the actions needed to achieve KPI.

Next, setting KPI helps

3. To check if the means are correct

If you find that KPI is not achieved through regular monitoring you need to think about re-examining the means as a priority.

For example, consider the case where daily posting to Facebook is regarded as a means to achieve a KPI (30,000 page views per month) in the aforementioned online store that retails accessories. In this case, if the content of the posts isn’t meaningful, the effective result will not be as expected. On the other hand, in the case of adding more pages on the site, simply dividing a number of pages will make the site more difficult to read.

You become aware of any problems with the methods used and that gives you an opportunity to improve the method itself.

4. Check the KPI itself

If you find that a KPI is not achieved through regular monitoring you need to consider not only if the KPI has a realistic target numerical value, but also whether the KPI itself is an inappropriate intermediate goal for achieving the final objective. Because if the KPI itself is wrong, the means to achieve it would also be wrong.

Therefore, the setting of a KPI and its regular monitoring will enable you to find problems in the methods used, or to check whether the target set is appropriate so problems can be quickly identified.

Crucial Setting of KGI

You need to set up an intermediate goal (KPI) with concrete and realistic figures in order to determine the actual requirements, the means to be improved and to act – the ultimate goal (KGI) must be approached in the same way.

Therefore, you who define the KGI must deeply understand the details, characteristics, procedures, and rules of each operation that the team is working on.

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