The 5 Qualities of Excellent Corporate KPIsMarch 28, 2017 by Stacey Barr
Most organisations have lame corporate KPIs. They don’t align to strategy, give evidence of impact, or offer actionable feedback. If they can’t do these things, they can’t really be called corporate KPIs!
Corporate KPIs are the performance measures that the senior leadership team uses to steer the organisation into the future, to successfully execute the strategy that describes what matters most.
But excellent corporate KPIs are hard to find. Sure, many organisations find the financial goals and financial KPIs easy enough. But the non-financial goals and KPIs are too often useless.
It’s because they lack certain qualities that excellent corporate KPIs need, to be capable of steering an organisation into the future, or successfully executing strategy.
Quality #1 – Excellent corporate KPIs are attached to a corporate goal.
When a KPI or measure is attached to a corporate goal, we call that ‘KPI alignment‘. It means that there isn’t just a list of corporate KPIs – there is a one-to-one relationship between each KPI and each strategic goal.
For example, an energy and water authority has four specific goals, two of which are:
- “Provide leadership for the energy and water supply sectors”
- “Improve outcomes for stakeholders and customers”
They have a list of four KPIs, but they don’t visually (in the layout of their plan or a Results Map) or logically align to their goals. One KPI is “Stakeholder regulatory compliance”, which might align to one of the above goals. But it would be poor evidence of either. And none of the KPIs align at all with the other two goals they have.
The layout of a strategic plan must make it clear which KPIs are aligned to which goals.
Quality #2 – Excellent corporate KPIs are direct evidence of the corporate goal.
It’s easy to list a bunch of KPIs that you already measure, that you already have data for, that other similar organisations are measuring. But none of these qualities is sufficient for ensuring your KPIs actually do give direct evidence of your organisation’s specific goals.
An education department has a goal to “support the early development of children to provide them with the best possible start in life so they begin school ready to learn”. And the KPI for this goal is “Proportion of children enrolled in preschool the year before full time schooling for 600 hours per year”. How is enrollment in preschool evidence of how ready a child is to learn in school?
In contrast, an organ and tissue donation authority has a goal of “Improve organ and tissue donor conversion rates” and you can see how their measure of “Conversion rate – Number of actual donors as a percentage of all potential organ donors” is direct evidence of that goal.
Quality #3 – Excellent corporate KPIs are quantitative.
Yeah, yeah, I hear you: “not everything is quantitative”. But actually, virtually all performance results that matter can be measured quantitatively. Paraphrasing Douglas Hubbard, author of “How to Measure Anything”, if you can observe or detect a difference, then you can measure it. If you can’t observe or detect a difference, why would you set a goal for it?
A national sporting association has a goal of “Corporate leadership and unity.” And they measure this with KPIs like “Leading by example as a National Organisation” and “High level compliance to governance assessment completed”. These are not measures! KPIs measure results, and measuring means some degree of quantification. These KPIs read more like actions. Actions and measures are not the same thing.
To make their goal measurable, the sporting association would need to be more specific about the meaning of their goal. In particular, what difference is this goal about?
Quality #4 – Excellent corporate KPIs can be monitored over time.
A KPI is for steering, not judging. So it’s of little use when it only tells you whether or not you achieved the goal, at the end. Excellent corporate KPIs can tell you to what degree you’re making a difference, as time goes by. Then you have the feedback to correct your course, if need be.
Measures that can’t be monitored over time are usually not real measures. A university has a strategic goal “Educational excellence”. And it’s KPI is “Full introduction of the Scientia Educational Experience with effective integration of online learning.” It’s not a real measure; it’s a milestone. How would they get feedback over time about how excellent their education is, so they could correct their course if this initiative doesn’t work?
Quality #5 – Excellent corporate KPIs are strategic in nature, not operational.
A KPI is strategic when it measures a change the organisation is trying to make that is proactive, future-oriented, and about improving how it fulfills its mission and reaches for its vision. It’s a KPI that measures a change that only the senior leadership team can be responsible for.
A KPI is operational when it measures a result produced by a part of the organisation, like a business process or function. It still is about improving performance. But it’s a KPI that measures a change that a team within the organisation can be responsible for. It’s really important that every KPI is within the circle of influence of the people responsible for monitoring and responding to it.
The idea is that operational KPIs are the drivers (causes) of the strategic or corporate KPIs. But they are not evidence evidence of the strategic or corporate goals!
The KPI from the energy and water authority mentioned above was “Stakeholder regulatory compliance.” I’d suggest that compliance is never a strategic result! It’s a hygiene factor; particularly for an industry that has been regulated as long as this one.
This is a flaw that a lot of corporate KPIs have: they measure operational results that might have a causal effect on the strategic goal, but still are not evidence of whether the goal is achieved.
How excellent are your organisation’s corporate KPIs?
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