Key Performance Indicators, or KPIs, are used to measure the effectiveness of the underlying activities used to drive initiatives and ultimately achieve business objectives. KPIs offer insight into how effectively your organization is meeting its strategic objectives and offer a clear picture of overall performance.
Typically, we think of KPIs as something we can measure in numbers. These KPIs are quantitative - number of sales, waste, inventory, etc. But not all KPIs are easily measured, this is where intangible KPIs come into play. Intangible KPIs are qualitative rather than quantitative. Though they can be backed up by numbers, they are largely supported by anecdotal feedback from customers and employees.
Intangible KPIs measure intangible assets, one of three types of company assets. Other assets include physical assets like real estate and equipment, and financial assets like investments. Like other assets, intangible assets also assist in delivering value for your company.
Customer experience, internal processes, innovation, growth, and development are all examples of intangible assets. Though non-financial in their nature, intangible KPIs are equally as critical for measuring operational and financial performance and tracking the overall progress of your organization. Focusing on only financial and physical KPIs, can put your organization at a significant disadvantage.
Examples of intangible assets:
- Knowledge and skills
- Brands and patents
- Reputation and relationships
- Information and data
- Organizational processes
- Innovation and culture
The Importance of Intangible KPIs
Intangible KPIs broaden your perspective by offering a fuller view of your company’s overall performance and direction. Incorporating different types of KPIs into your business ensures that your company has a full 360 view of its organizational landscape and a more complete analysis of its performance.
Financial KPIs use concrete numbers to help companies track the past progress they’ve made - the data they provide are retrospective. While it’s important to track how far your business has come, it's equally as important to understand where you currently are and where you’re heading. Intangible KPIs empower companies to be proactive rather than simply reactive.
In addition, the business world has experienced a cultural shift over the years, as many economies have moved from being industry-based to more service-based. As a result, this shift has required many companies to change their approach and priorities to accommodate the new “knowledge economy”. Service-based economies are no longer driven by physical assets, but instead rely heavily on intangible assets that support brand value.
This isn’t the only shift we’ve experienced. The last few years have proven that above all, for a company to survive constant and sudden disruption it is essential to have a strong core workforce able to demonstrate resilience and agility. By focusing on strengthening intangible assets, companies better ensure their ability to be adaptable in the face of change while remaining competitive.
How to Identify Valuable Intangible KPIs
- The first step to developing and measuring intangible KPIs is to understand what drives value within your company. Make sure the strategic direction and objectives of your business are clear, this is essential when determining the strategic value of your intangible assets.
- Important intellectual capital is dynamic and interacts with other resources and capabilities to give the company its strategic advantage. When developing intangible KPIs, you need to assess your intellectual capital and determine which resources help deliver on objectives and drive value for the company.
- Next, it is useful to create a visual map of how the intangibles support the strategy in your organization. Doing so will allow you to better visualize and communicate how KPIs support your mission, vision, and strategic objectives.
- Determine which intangible assets are worth measuring by establishing the Key Performance Questions (KPQs) the indicator will help answer. These questions represent what managers want to know about intangible assets and affirms their usefulness as KPIs. If there is no question, then there is no need for the resource to be measured.
Examples of intangible KPQs:
How well are we fostering a culture of innovation and continuous improvement?
How strong is our employer brand?
How motivated is our workforce?
- The development of key performance questions for intangible KPIs should engage everyone in the company. Because intangible assets are largely based on personal experience, it’s important to involve people in the process by asking them what questions they believe are most relevant. KPQs reflect what really matters to the company, so you want to ensure that everyone resonates with them.
- KPQs should be concise and open. Each KPQ should be one short, straightforward, and open question using language that is familiar to everyone within the company. Avoid closed yes or no questions. The question should stimulate conversation, provoke reflection, and generate ideas for moving forward.
- Whereas tangible KPIs measure the past, intangible KPQs are focused on the present and the future. KPQs should be phrased in a way that reflects this using present tense. By focusing on the present moment, the KPQ helps gather data that can inform present and future decision making.
- Once you’ve created your KPQs, you need to determine how you will measure them. What tools and instruments of measurement will be used? What sources of data will be useful? Who will measure the KPIs and how frequently? Who needs to see the information and how should it be presented and reported?
- KPQs should be continuously refined to improve their focus. KPQ answers should be evaluated to see how well the KPI answers the question, and how effectively the KPI contributes to better decision making.
How to Measure Intangible KPIs
Now that you’ve determined which intangibles are valuable, how do you put them to work? The next step in developing intangible KPIs is to determine what instrument of measurement is most appropriate for collecting meaningful data.
Listed below are valuable tools for measuring your company’s intangible KPIs:
- Surveys and questionnaires are a simple and inexpensive method for gathering employee and customer feedback. Example KPQ: How well are we promoting our services?
- Personal interviews provide more in-depth data than rigid surveys and can lend valuable context that may otherwise go unconsidered. Example KPQs: How effective are we in managing our relationships? To what extent do people feel passionate about working for our organization?
- Focus groups and workshops are facilitated group discussions in which participants express and share ideas, opinions and experiences. Focus groups are helpful for assessing customer experience, engagement, team-working climate or trust. Example KPQs: How successful are we at sharing one set of values? How well are we sharing our knowledge?
- Peer-to-peer evaluation requires participants to assess one another’s performance openly or anonymously. This process enables people to learn from each other and to consider their own performance from the perspective of others. Example KPQ: How well are our employees working together to execute our growth and innovation strategies?
- Mystery shopping uses a “secret shopper” posing as a client or customer to evaluate service. Many retail businesses, banks and hotels have used mystery shopping to assess customer experience. Example KPQ: How do our customers perceive our service?
- External assessments are independent surveys conducted by external institutions that provide independent feedback regarding brand recognition, customer awareness or market share. Example KPQ: How well are we innovating?
- Observation is a method to collect information directly by observing situations or activities objectively without intervention. Observations is a common practice for assessing organizational culture, skill and experience levels of employees, emotional intelligence and creativity, safety procedures. Example KPQ: How effective is our leadership development and other employee training programmes in developing our needed competencies?
- Data tracking systems can collect data from both internal and external sources and provide valuable market and performance insights. Example KPQs: To what extent are we retaining talent? How well are we doing at creating a culture that motivates and engages our employees?
While all of the above methods are useful depending on the KPI being addressed, using multiple instruments of measurement in tandem is also beneficial. Leveraging analytics data collected from internal tools in conjunction with other methods like surveys or interviews can provide a more robust assessment of the KPI in question.
For example, tools which may be used for other purposes within the company, such as software to monitor employees working remotely, can be used for more than simply computer and internet monitoring. Such software can be put to work to provide valuable analytics you can use to support your intangibles, in addition to primary functions like monitoring a computer or managing your remote workforce.
Leverage BI Tools to Manage Intangible KPIs
In order to measure and manage intangible KPIs effectively, companies should address intangible KPQs by also employing valuable data from their BI and analytics tools. Tools used for time and attendance tracking, agent management, pc software monitoring, or productivity monitoring can all provide valuable insight for your KPQs.
Workforce analytics & productivity software like Insightful can prove to be particularly valuable in supporting intangibles. Insightful contains beneficial features similar to software for employee monitoring that not only monitor staff computer activity, but provide a comprehensive overview of trends within your workforce. Insightful can help employers harness the power of their analytics and support intangible assets by providing insight into:
- manager-employee relationships and employee engagement.
- managerial expertise and processes.
- effectiveness of organizational processes.
- employee burnout risk and employee wellbeing.
- performance of new employees within the initial review period.
- average time employees are in the same job.
- average time employees spent on different tasks.
- possible bottlenecks in processes.
- maintaining secure information systems.
Insightful also provides visualization and attractive reports that can be used when presenting data to internal and external stakeholders.
Insightful can help your organization turn numbers into meaning, by providing real-time insight that allows you to act fast and make data-supported decisions to drive intangible KPIs and manage risks. By leveraging these insights, you can prevent drops in productivity, sales, and customer and employee satisfaction while increasing retention rates and strengthening your reputation - all of which make you one step closer to achieving your business goals.