25. KPIs vs Critical Drivers

May 01, 2026 04:09 · 7:01 · English · Whisper Turbo · 2 speakers

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Lecture Index

0:14

S… Speaker 1 (25. KPIs vs Critical Drivers)

In the typical economic cycle the time period from trough to peak is about 10 years. Ever wondered why 90 plus percent of all businesses fail within 10 years? Because most businesses can only survive as long as the economy is on their side.

0:34

S… Speaker 1 (25. KPIs vs Critical Drivers)

Look, any idiot can make money when the sun is shining and the wind is at their back and the tide is rising. Just look at all the money made during the dot-com boom in the late 1990s or the real estate riches created from 2003 to 2007. The vast majority of people who made money riding these waves up gave it all back when the economy flipped upside down.

1:00

S… Speaker 2 (25. KPIs vs Critical Drivers)

If you can only be successful when the environment is helping, you're doomed to failure because the only constant in business is change. If it can't go up forever, it won't, which means that acquiring the skills and tools required for sustainability is of paramount importance. Creating sustainable success means that you know what to do during the good times and the bad.

1:30

S… Speaker 1 (25. KPIs vs Critical Drivers)

We've talked a lot about the importance of measuring and how it's the only way to create a sustainable business and sustainable success.

1:39

S… Speaker 2 (25. KPIs vs Critical Drivers)

So far, we've talked mostly about measuring a few of the key performance indicators, KPIs, key performance indicators, as they're sometimes called. Sales divided by assets. Operating cash flow divided by profits. These are examples of KPIs. No question, these are powerful tools to help you understand what happened after the fact.

2:07

S… Speaker 2 (25. KPIs vs Critical Drivers)

In effect, KPIs are like blood tests. You study the results you get from your test and then you begin to do some analysis to determine where you're failing, where you're barely passing, and maybe where you're making an A. The only problem with KPIs is that they're like an autopsy. They're like the bathroom scales. They tell you what's happened after the fact.

2:33

S… Speaker 2 (25. KPIs vs Critical Drivers)

But they're not predictive about what needs to change to create different results in the future. Business analysis is fundamentally about KPIs. But if you want a PhD in measurement, if you want to really amp your level of sophistication and permanently change your business game, look at critical drivers as well. Think of critical drivers as causes.

3:02

S… Speaker 2 (25. KPIs vs Critical Drivers)

and KPIs as effects. If a KPI is your cholesterol, then a critical driver would be your diet or your exercise. Most business owners make the mistake of only measuring KPIs when they could and should be taking preemptive action by creating and measuring critical drivers as well. Let me be clear.

3:29

S… Speaker 2 (25. KPIs vs Critical Drivers)

Critical drivers and KPIs are not mutually exclusive. You should never rely on just one or the other. The basics are KPIs. Critical drivers put your measuring and your optics on steroids. To design your critical drivers, ask yourself this question.

3:50

S… Speaker 2 (25. KPIs vs Critical Drivers)

When I have a bad month financially, what happened that shouldn't have happened or what should have happened that didn't happen? I'm going to tell you there's only three to five things regardless of the industry or the business that you're in. The things themselves will vary significantly from business to business. But anytime you have a bad month financially, there's only a few, three to five things that could have caused it.

4:17

S… Speaker 2 (25. KPIs vs Critical Drivers)

And none of these three to five things will be that somebody left the light on in the janitor's closet one night. These critical drivers are the predictors or the activities of your business's results that you need to measure on a daily or weekly basis.

4:37

S… Speaker 2 (25. KPIs vs Critical Drivers)

Executing, measuring, and correcting these critical driver activities on a consistent basis will ensure that you never have a nasty surprise when you look at those KPIs at the end of the month. It's simple. It's cause and effect. Anytime the effect you want is missing, so is the cause. Manage the cause and the effect will take care of itself.

5:06

S… Speaker 2 (25. KPIs vs Critical Drivers)

An added benefit of designing great critical drivers for your business tool belt is you can course correct daily instead of waiting until the 15th of the following month to see your financial results and measure your KPIs. A huge problem for business owners is the lag time between a faulty decision and a wrong activity and the measurement of those results.

5:33

S… Speaker 1 (25. KPIs vs Critical Drivers)

developing robust critical drivers solves this problem forever if you happen to be in a business that has a pipeline for example then what you did three months ago has serious implications for your results this month

5:50

S… Speaker 2 (25. KPIs vs Critical Drivers)

Perhaps your business is impacted by the size of each transaction or the number of speeches that you give or the labor cost per sale or the number of sales calls made. Any of these could be a critical driver for your business. Take the thinking time to do a couple things. Number one, develop the benchmarks and standards or expectations for each critical driver.

6:18

S… Speaker 2 (25. KPIs vs Critical Drivers)

Number two, communicate those expectations to your team. Number three, set the rewards and the consequences around the attainment of these outcomes. And number four, measure and report and correct the execution on a daily basis. If you do these four things, you'll be stunned at the execution and consistency your team produces.

6:42

S… Speaker 2 (25. KPIs vs Critical Drivers)

Catch the errant activity or the aberrations early enough before they become a problem and you'll have fewer problems. Set and communicate the clear critical drivers and you will achieve superior financial results.

This transcript was generated by AI (automatic speech recognition). May contain errors — verify against the original audio for critical use. AI policy

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