It is important to collaborate with operators to develop KPI’s that are fair, measurable, objective and achievable. One thing to keep in mind as you develop KPI’s is that it’s okay for them to change over the course of the life of the contract; as a matter of fact, it is encouraged! KPI’s need to evolve with the business. Here are three tips to keep in mind about KPI development:
- The risk and the reward must be meaningful for KPI’s to work! We always recommend 50% risk and 50% reward whenever possible.
- KPIs should be clearly defined and easy to understand. Avoid vague language or metrics that can be interpreted in multiple ways. KPI’s should be quantifiable, and the metrics should be numerical so progress can be tracked objectively.
- It is important to set goals by establishing achievable targets that challenge the operator without being unrealistic.
Strong KPI’s can be a contract’s superpower. Measuring the successes and challenges of an operation is difficult if expectations are not clearly defined. Creating a system of accountability from the start of a contract term sets the tone for a positive relationship that is beneficial to both parties.