Despite the potential benefits of data analytics and business intelligence, many organizations continue to be overwhelmed by too much disorganized data. Instead of developing actionable insights from their information, they spend unnecessary time sorting and analyzing meaningless data points. This applies to real estate as well, where organizations and professionals are constantly trying to reconcile thousands of data points from both their portfolio properties and the larger market.
Establishing organizational Key Performance Indicators (KPIs) is a good way to reconcile data. By developing a list of highly specific indicators to track, organizations are able to derive more direction from their data without spending significant time filtering and disseminating.
For organizations looking to develop their portfolio KPIs, what key things should they be doing? How do they choose the best indicators? Where should they start? We suggest four strategies: developing key goals and objectives, focusing on what you need to know, developing critical success factors, and being specific.
Strategy 1: Develop Key Goals and Objectives
Developing a list of goals and objectives is the first step in building effective KPIs. KPIs need to be relevant, measurable and most importantly, specific to an organization. Consider the following questions:
- What are your key operating objectives?
- Do you need to quantify specific issues or strategies?
- What is the measurable outcome of a strategic initiative?
- Who is the audience and what are their priorities?
- Do your KPIs inform their immediate decisions?
Some KPIs are helpful for broad decision making, others for departmental use. Organizations need to develop KPIs based on organizational need and end user objectives.
Strategy 2: Focus on What You Need, Not What You Have
One of the most significant mistakes organizations make when developing KPIs is focusing on available data and working outwards. KPIs should focus on key organization or building-level trends. Teams are better off if they define what they want to observe first, and secure the data afterwards. This reduces the likelihood that they will limit their analysis based on the strength of their data platform. You need to have the underlying data to measure any KPI that is critical to your organization.
Strategy 3: Develop Both Critical Success Factors and KPIs
Critical success factors are elements that organizations need to achieve an objective, whereas KPIs are the metrics measuring those factors. Both are important when developing organizational goals and objectives.
For example, consider a portfolio properties with an objective to drive net income growth. Critical success factors would be goals such as increasing average rents by a certain percentage, or maintaining a minimum occupancy level. KPIs could be the change in portfolio income or lease renewal rates. In this case, KPIs are the metrics supporting the underlying business objectives or factors.
Strategy 4: Be Specific
Many firms automatically assume that more metrics and more KPIs lead to better organizational performance. However, having too many KPIs can be confusing. It makes it difficult to understand key business objectives, and dilutes important indicators. Many organizations confuse metrics with KPIs, which can lead to having too much information. Metrics are simply statistics and figures, whereas KPIs are trends and dynamic indicators. Many firms also spend too much time on vanity metrics, which are not important.
Organizations need to decide whether a data point is a metric or a KPI, and then decide if it is worth including in a dashboard or report. One technique organizations can use to develop KPIs is combining multiple metrics into an index or single indicator.
KPIs for Portfolio Properties at 4tell™ Solutions
At 4tell™ Solutions, the use of KPIs is a key feature of our analytics and business intelligence platforms. By developing KPIs for portfolio properties and relevant business units, we are able to help our clients develop better strategies around processes such as capital planning and investment analysis. Would your organization benefit from a similar process? Contact us to get started.
Photo: Anthony Esau