Where Are You On The KPI Saturation Spectrum?by Stacey Barr |
Mark Hocknell, PuMP Consultant, has worked in the area of performance measurement for about 10 years now. Prior to that, Mark’s 15 years in senior management gave him plenty of experience as a user of measures, metrics, statistics, data, counts and numbers of all kinds. As business leaders, we know it’s useful to inform our decisions with the right numbers. But it can feel impossible, for two very common reasons, as Mark explains.
There appears to be a dichotomy in organisations today: they are either a Measure Free Zone (MFZ), or they have Too Many KPIs (TMK). They sit at one or the other extreme on the spectrum of KPI saturation.
The Measure Free Zone (MFZ) is one extreme of KPI saturation.
MFZ organisations still have measures: they count all the stuff they need to be compliant and produce the annual report. There are typically people in IT who can pull numbers on a lot of activity, and there are people in the back room counting the beans. But when it comes to measuring the results of their work, there is a void.
Sure, intuitively these organisations know where they are going. But they are not getting any evidence or feedback to let them know what is working (or not) and by how much. Decision-making, then, often becomes problematic for the management teams. Discussions are based on opinions. Rhetoric becomes a key influencer on decisions and strategy, rather than using evidenced based feedback to track progress towards our goals.
There are 4 steps to move away from the MFZ.
Moving away from the MFZ extreme is to start small. Agree on an initiative or an area of the business where they are looking to achieve some change. Then follow these four basic steps:
- Clearly and specifically describe the one key result of that change. And do not use any weasel words to articulate the result you are looking to achieve.
- Deliberately design and prioritise three measures for the result. Make sure these measures truly evidence the result.
- Define the measures to detail their calculation and data procedure, and track your progress using these measures.
- As you use the measures try and be aware of the change you are experiencing, the different conversations, the different actions you take based on the feedback from the measures.
Careful… this can become addictive! Can you guess why?
Too Many KPIs (TMK) is the other extreme of KPI saturation.
TMK organisations are drowning in numbers, ratios and statistics. Monthly reports are centimetres thick, and nobody reads them. So then someone has the bright idea to produce a ‘report on a page’, it’s on A3 paper and in miniscule 8 or 9 point font so that we can cram in as many measures and numbers as possible.
What’s missing here is some clear articulation of the objectives, goals or results that are important to track – the things we are really trying to make a difference in, the areas we have chosen to improve our performance. And in the absence of a clear focus, everything seems important.
There are two stages to move away from TMK.
Firstly it’s about separating out the KPIs. The existing KPIs will be measures (or activities) with a target attached. But these KPIs are almost always describing business-as-usual, not strategic improvement. So, let’s call these KPIs “Standards of Performance”. We might keep an eye on them from time to time, but typically they just tell us what is happening, day to day.
Secondly, look at the KPIs that are about some area of performance where we are looking for a change. Collate these KPIs around results we are trying to achieve. Will the KPIs tell us if we are making progress toward the result?
- Yes? Great, then we look at those KPIs collectively as they provide feedback on how we are tracking against a result.
- No? Then we have the wrong KPIs, even if we’re reporting and tracking them because we always have. We need to design new performance measures, aligned to the results we’re trying to achieve.
Find the happy medium between the MFZ and TMK extremes.
In moving away from either extreme, the key is to agree on the results and the KPIs that will help us understand how we are performing. The happy medium between the extremes is unique for each organisation, but characterised by having the clearest results that are tracked by the fewest relevant measures.
So what is your organisation: a MFZ or a TMK? Or are you somewhere in-between? Where might you start, to know the results you are looking for, and the measures that will give you feedback about how you are progressing towards those results?
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