Where Is Your Performance Measurement Process Breaking Down? (Part 2 of 2)April 6, 2010 by Stacey Barr
It’s a great idea to diagnose where your own performance measurement process might be in most need of improvement, because if you want more meaningful performance measures and KPIs, you need to change the process that you use to produce them.
You know that Albert Einstein said: “We can’t solve problems by using the same kind of thinking we used when we created them.” Thusly, we can’t get better measures or KPIs by using the same kind of thinking we used when created those we currently have.
So when you understand how the fundamental performance measurement process works, you have a better model for how to start fixing your performance measurement process, and start producing more meaningful performance measures and KPIs.
Start by flowcharting, just simply, your existing process for performance measurement. Flag where your biggest problems are in your performance measurement process. Then examine each step in your process that needs fixing, and decide what different thinking is needed, what different approaches are needed, to remove the root causes of those problems. Yes, we’re talking standard process improvement here.
Let’s look each phase or stage of a typical performance measurement process:
STAGE 1: Selecting Your Performance Measures and KPIs
How do you select your performance measures? When do you review and choose your measures? Who selects them? How do you align them to goals or strategy or processes or functions?
There are two major root causes for why we end up with too many of the wrong kinds of KPIs and never enough of the right kind. The first root cause is the pursuit of measures without a clearly articulated business strategy that is results-oriented rather than action-oriented. The second root cause is the use of brainstorming or other feeble methods of choosing performance measures.
STAGE 2: Capturing the Data For Your Performance Measures and KPIs
How do you identify and capture the performance data your measures need? Who designs the data collection processes? Is data collected manually or is it automated? How do you decide when to stop collecting data? Where is performance data stored? How is data extracted from systems for analysis and reporting? Who does it?
Two big root causes mean that measures don’t get implemented, or why we end up with 12 versions of the same measure, or completely the wrong calculation or data being used. One is that we are too casual about defining our performance measures in enough detail, and the other is that we fail to involve the right people in the decision making about what gets measured and how.
STAGE 3: Analysing and Reporting Your Performance Measures and KPIs
How do you turn the data into your performance measures? Is this analysis automated or manual? Who does it? What questions drive the analysis? How often are measures reported? What kinds of reports are produced? Who produces them? Which parts of the reporting process are automated or standardised? How are the reports structured or designed? Which reports go to which audiences?
One big root cause continues to ensure that performance reports and dashboards distort the truth and encourage the wrong responses to our KPIs. It’s simply that people don’t understand how to visually display quantitative information to reveal true signals, instead defaulting to poor graphics like silly dials and gauges and pie charts.
STAGE 4: Interpreting and Using Your Performance Measures and KPIs
How are your performance measures interpreted and used? How are the signals in measures highlighted or flagged? What are the rules that are used to decide when performance has changed or needs attention? Where and when are performance measures used? What role do they take in decision making? How are actions or responses decided and executed? How are strategies and initiatives to improve performance tested?
A fundamental root cause that the majority of organisations don’t even know they have leads to consistently missing important signals until it’s too late and not reaching targets. It’s a failure to understand and appreciate statistical thinking and instead relying on very dangerous interpretation methods like ‘this month to last month’ and other two-point comparisons.
To get better KPIs, we need to change our thinking.
If your organisation is like most, you’re not going to find the answer to better KPIs and performance measures by looking within. You really need to open up to different approaches to performance measurement, to proven techniques that are designed to specifically solve those common problems by eliminating the root causes. Remember Einstein’s wisdom: “We can’t solve problems by using the same kind of thinking we used when we created them.”
Learn more detail on how to improve your performance measurement process in a free webcast recording you can listen to or download immediately, by registering for free at //www.staceybarr.com/fixyourkpis.html
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