This post was inspired by a friend who works in the field of customer analytics and is particularly gifted with data and statistics. He told me the story of a series of "brainstorming sessions" he was invited to with the Execs of the large organisation he works with. The brainstorming included coming up with ideas for what the key indicators and targets should be for the business. My friend's role was to collect the data so they could then determine the "right" ones. Sounds logical and lots of businesses do this, but after a six weeks of back-and-forth with more KPI ideas, looking at the data to hopefully get some inspiration, the Execs figured their attention was probably best needed elsewhere.
KPI Issue #1: Using gut-feel to determine what our key indicators are. Brainstorming is a great creative idea generation process, but not good for figuring out what our KPIs need to be. Instead we should be clear on the result or outcome we want to achieve, then design the measures that will provide the best feedback on our progress towards the result.
I was recently engaged to review the Exec Balanced Scorecard (BSC) for a medium-sized financial services group. The spreadsheet was really well laid out around the four quadrants of performance, objectives aligned, weighted targets and the measures that were complete in place, and others still to be developed noted. All seemed good. However, as a team the Execs had 14 targets, each with a weighting of either 5% or 10%. And this is the point of the BSC right..? The problem though is that everything is balanced, so with 14 targets all weighted pretty much the same, there is no focus, no priority. From talking with the Exec two key priorities for the business were very clear in his mind, yet they were not reflected in the BSC targets, at all really.
KPI Issue #2: KPIs do not signal the focus area or priority we are trying to improve or get the most traction on. Key Performance Indicators should provide a key message to the organisation about what is important, what deserves the most of our attention and effort.
The irony about the previous example is that McChesney, Covey and Huling in The 4 Disciplines of Execution (2012), presented research that showed if you had between 11-and-20 goals, your chance of achieving those goals "with excellence" was zero. Maybe if you had 2-3 goals you would have a good chance of achieving those 2 or 3 goals. And yet most organisations report that they achieve their goals, and the Execs in the previous example will probably claim a victory next year. So what is happening here...?
KPI Issue #3: KPIs are used as targets to 'manage or reward performance' which tends to mean that we will set and agree the targets we know we can get. Or, maybe we manipulate the data in some way to claim success. And in turn polluting the quality of the information we use to make decisions. KPIs should provide people with the encouragement to improve the performance of the processes/systems they manage.
During a recent In-house PuMP Blueprint Workshop, I made a throwaway comment that some organisations have about 150 KPIs. A manager within the group that evening counted their current number of KPIs and reported it to be 194. So, 194 key performance indicators. That takes a lot of juggling.
KPI Issue #4: KPIs are used to mix up BAU with target-areas-for-improvement and then successfully hide what is important. Not all measures should be KPIs.
On second thoughts let's ban KPIs outright, we have made them useless to us.
Perhaps we should adopt KPMs, key performance measures - that are designed to provide us with meaningful feedback on what we are trying to achieve, the change we are trying to gain, the improvements we are trying to make. Maybe we can use Targets with some of these KPMs, perhaps then agree on 2-3 goals and reward teams and leaders for when they can demonstrate improvement and goal achievement.