- Intelligent utilization of KPIs is central to success in a sponsor-backed environment.
- The most important KPIs are those that drive the business forward. PE-backed CFOs should ensure recurring touchpoints center on metrics-driven discussion.
- Fast-paced businesses often benefit from equipping key personnel with real-time access to relevant KPIs.
- When stepping into a new role, a CFO should audit the metrics currently in place before devising a plan for optimization.
What gets measured gets managed. While this classic sentiment certainly rings true in private equity portfolio companies, management teams often fail to appreciate the ramifications of over-measuring.
Attempting to leverage an overelaborate metric dashboard throughout a business distracts from the few true critical drivers of organizational achievement. An utter absence of KPIs is in clear conflict with best practices, yet a PE-backed CFO can also step into a role where the organization is suffering from KPI overload. A lean dashboard tends to be more functional and impactful than a package that contains an exhaustive number of metrics scattered across innumerable pages.
KPIs should be leveraged throughout a business’s operating cadence to drive analysis, discussion and decisions. While KPIs are commonly grouped into categories such as bookings, operations and staffing, PE-backed CFOs who also illustrate the connection between frontline metrics and the company’s EBITDA, revenue, and exit multiple targets help drive top-down alignment.
Yet identifying the appropriate KPIs for the business is often less of a challenge than ensuring consistently reliable inputs. Generating clarity and discipline around how items are measured and reported is essential to data integrity. The finance chief must act as a force for objectivity and ensure operational units remain accountable to agreed procedures even in the face of missed forecasts or failed targets.
PE-backed CFOs utilize several be...