The 4 Things More Important Than the KPI Terminology Debateby Stacey Barr |
Darrell U. asks: “What are the definitions of performance measurement terms… metric vs. measure, performance indicator vs. key performance indicator?”
Darrell goes on to rightly say that there is plenty of confusion on the meaning and relationship of these terms to each other, that there is no standardised usage in the literature e.g. ‘metric’ and ‘measure’ are used interchangeably by many, or used as one subordinate to the other sometimes, and the reverse other times. Good grief.
How do we deal with the performance management terminology?
Every debate about performance management or KPI terminology that I have witnessed or waged an argument in has led to no practical outcome. It feels like a waste of time, and it is a waste of time until we reach a point where there is a recognised global professional KPI association with enough credibility and reach to own such dilemmas and solve them.
The anatomy of performance management is more important than KPI terminology.
The KPI terminology debate attempts to put consistent labels onto specific concepts of performance management. But the concepts are far more important than the labels, in my humble opinion.
Here’s my take on the four most important concepts associated with performance management (and of course I’m using my own preferred KPI or performance measurement terminology to label these concepts):
Performance Result – also called objective, goal, critical success factor, key result area, key result, output, outcome. Using just words, the Performance Result describes clearly and unambiguously a priority that you’re trying to improve. Examples include:
- increase revenue
- improve subscriber loyalty
- decrease harm caused to employees
Performance Measure – also called indicator, performance indicator, key performance indicator, KPI, metric, lead indicator, lag indicator, performance index. Irrespective of whether it is forward-looking, backward-looking, precise or estimated, simple or complex, a Performance Measure is a quantification of the degree to which a Performance Result is occuring over time. Examples include:
- Total Monthly Revenue
- Weekly % of Subscribers Who Unsubscribe
- Number of Lost Time Injuries per Month
Target – also called benchmark, best practice, standard. Your Performance Measure tells you what your current level of performance is, but your Target tells you what your desired level of performance is (and ideally also the time by which you want to reach that desired level). Targets are usually combined with Performance Measures into goal or objective statements. Examples include:
- Increase Total Monthly Revenue to $200,000 by June 2013
- Reduce Weekly % of Subscribers Who Unsubscribe to 0.5% by December 2012
- Reduce Number of Lost Time Injuries per Month to 3 by March 2013
Improvement Initiative – also called strategy, project, improvement project, milestone. The actions you have chosen that will close the gap between your current level of performance and your desired level of performance are Improvement Initiatives. These are what your strategic budget invests in. Examples include:
- Develop a new high-end product for our top 10% of customers.
- Research needs of current subscribers and more tightly align the content of newsletters to address those needs.
- Design, test and roll out a Safety Culture Program to increase employee ownership of safe working practices.
Have I opened another terminology can of worms?
TAKE ACTION: There are two important things to do. Firstly, be clear about the meanings of the basic performance management concepts, before you bother defining a KPI or performance measurement terminology. Secondly, define the terminology you use in your business or organisation, write a glossary for everyone to refer to, and be consistent in how you use it.
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