Do We Need a KPI Methodology?

by Stacey Barr |

Do you have a KPI methodology? Or does it feel more like an ad hoc collection of tasks or workshops? How’s that working for you?

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The definition of the word ‘methodology’ varies. Dictionary.com defines it as ‘a system of methods used in a particular area of study or activity’. Wikipedia defines it as a meta concept to that, as ‘the systematic, theoretical analysis of the methods applied to a field of study’.

Irrespective, it’s a word that many of us understand to mean a deliberately designed approach to something, to achieve a specific result.

We have methodologies because we want to achieve something as easily and successfully as possible.

In the absence of methodology, we are ad hoc, random, even chaotic. And this wastes time and energy, and often fails in achieving the result we want.

The result we want from performance measurement is that we achieve our goals sooner and with less effort. A good performance measurement methodology is a system of methods deliberately designed to achieve this. But most organisations don’t have a good methodology, and many don’t have one at all.

Most approaches to KPIs and performance measures are ad hoc and unproven.

There are common methods people use to choose performance measures and KPIs:

  • Brainstorming them with colleagues
  • Buying them off-the-shelf from KPI libraries and databases and special reports
  • Benchmarking what other organisations in their industry are measuring
  • Basing them on existing data they already have readily available

But the people who use these methods still don’t have great KPIs or measures that help achieve goals sooner and with less effort. That’s because there is no theoretical basis to these approaches. They’re just common practice.

A good methodology for KPIs and performance measures has eight features.

A good KPI methodology isn’t ad hoc or made up on the spot. It’s not a single tool or template. It’s not vague and generic. It’s not a software application. And it’s most definitely not a prescribed list of KPIs sorted by function and industry.

But, what features make a true methodology? While I couldn’t find a definitive list of features, I kept noticing the same concepts being discussed over and again, describing what a proper methodology should be like. There were eight of them: comprehensive, non-prescriptive, necessary, founded, proven, practical, useful and transparent. And in the application of these to a good KPI methodology, these features mean this:

  1. Comprehensive: All parts of the KPI methodology collectively assist each task or step or stage in performance measure development: from selection, through implementation, to use.
  2. Non-prescriptive: No part of the KPI methodology dictates the performance measures (or KPIs or metrics or indicators) to use, but rather facilitates the user to create the performance measures appropriate to the user’s situation.
  3. Necessary: All parts of the KPI methodology are chosen and designed to replace poor KPI practices that don’t work and eradicate or ease known struggles or challenges with KPIs.
  4. Founded: Each part of the KPI methodology has a consistent rationale, philosophy, or set of principles, about what good KPIs are, what purpose they serve, and how they should be created and used.
  5. Proven: The KPI methodology reliably produces performance measures that help achieve goals sooner and with less effort, no matter who uses the methodology or in what context they use them.
  6. Practical: The steps of the KPI methodology can be learned, resourced, and performed as part of the routine work of strategy development, performance monitoring and improvement.
  7. Useful: The KPI methodology improves people’s experience of creating and implementing and using KPIs.
  8. Transparent: The KPI methodology’s limitations or weaknesses in producing performance measures are known, openly admitted, and continually improved upon.

Is yours a true performance measurement methodology? We use PuMP, and it’s about the only true performance measurement methodology we know of, one that has all of these features. Do you know of others?

Do you have a KPI methodology? Or does it feel like an ad hoc collection of tasks? How’s that working for you?
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