• Comprehensive key performance indicators (KPIs) are crucial to the success of any organization. Strategically defined targets can help ensure alignment between leadership and sponsors, while also creating value and mitigating risk.
  • PE-backed CXOs who integrate frontline metrics and the company’s EBITDA, revenue and exit goals help drive top-down alignment.
  • Some challenges may exist such as lack of access to real-time data, but well-designed and relevant dashboards coupled with strategic leadership and open communication can improve decision-making.
  • When establishing KPIs, Nathan McBrayer, a CFO with 25+ years’ experience across a number of sectors states, “Avoid a one size fits all approach and instead assess what needs to be addressed now such as increasing cash flow to stay afloat.”

In a sponsor-backed environment, intelligent utilization of KPIs is central to success, and the most important KPIs are those that drive the business forward. Whether in a restructuring or exit phase, agreed on indicators can inform timely business decisions.

Defining metrics to address business needs

“KPIs exist to stimulate and inform critical business decision making. “

Nathan McBrayer, multi-time exited CFO and former Operating Partner

PE firms base their decisions on numbers-driven data. Before KPIs can be measured, it is critical to identify which metrics need to be tracked — and why. To this end, in order to effectively define KPIs, one must:

  • Identify and set clear financial and non-financial objectives tied to specific time targets (as they pertain to near term goals and exit strategy).
  • Determine quantitative tracking metrics as they pertain to each objective.
  • Communicate your KPIs across the organization to enhance transparency and foster collaboration.
  • Assign responsible owners to increase accountability and drive results.
  • Determine reporting structure and frequency.
  • Evaluate and continuously assess targets as needed.

KPIs may be informed by the type of industry and where in the lifecycle of the company you are focused. For example, in one case, a medical group’s C-suite identified that cash flow was needed imminently. A thorough analysis uncovered that by closing the receivables gap (patient balances) the business could quickly optimize cash availability. Front desk staff was trained accordingly, and a KPI was established to ensure that a certain percentage of outstanding balances was collected by every doctor’s office/location.

This positive narrative and quick win extended the life of the business and showcased the type of success the team could d...