Which Performance Measure Method Produces the Best KPIs

by Stacey Barr

This research shows with performance measure method produces KPIs that have the best scores based on 13 KPI Excellence Criteria.

Which Performance Measure Method Produces the Best KPIs? Credit: https://www.istockphoto.com/portfolio/Andy_Di

One of my ongoing research projects is to find out how the KPIs in my readers’ organisations score across 13 criteria of KPI excellence. So far, the overall score is 66% on a 100% scale.

But that’s not a number you can do anything useful with. What’s useful is to dive into what produces this number, such as the performance measure methods used. And that’s a good place to start: what are the KPI methods that the researched organisations use?

Which performance measure methods do organisations use?

The most commonly used performance measure methods were PuMP and, if you believe it’s a true performance measurement method, the Balanced Scorecard (but I don’t believe it is). There were very few mentions of Lean and Six Sigma as methods, too.

The most important point, however, is that the vast majority of organisations have no formalised performance measurement method at all.

Graph: Performance Measure Methods Used

This adds a limitation to what we can draw from this research. The vast majority of people who responded work in organisations likely to have low measurement maturity and, therefore, high misunderstanding of what good performance measurement is. This means at least two things:

  1. They will mistakenly think things like spreadsheets, brainstorming, SMART, and working groups are proper KPI methods.
  2. They will overestimate the goodness of their KPIs.

Consequently, we won’t see as much spread in the scores of KPI excellence. In fact, we see hardly any low scores at all. And that’s surprising because it doesn’t match what we see in reality.

Even though we need to take care interpreting this research data, let’s jump to the punchline: which performance measure method produces the best KPIs?

Which performance measure methods lead to the best KPIs?

Even with the very narrow spread of KPI Excellence scores, given the overestimation mentioned above, it appears that PuMP still stands out as the leader:

Graph: KPI Excellence Score by Method Used

It’s got me very curious what the custom approaches are that some organisations are using… But given the top three scoring KPI methods are, indeed, real KPI methods, the results are not surprising: a deliberate approach to performance measurement will produce better KPIs.

What exactly does a deliberate performance measure approach do, to produce better KPIs?

So, how can organisations get better KPIs?

The research was, as mentioned, based on 13 criteria of excellent KPIs. For those organisations that scored the lowest on the KPI Excellence Assessment, these were the five criteria that were their weakest:

  • Criterion 2: Measures are created for results-oriented goals. One of the biggest misunderstandings in measurement is the difference between action and result. Too many KPIs track the activity to achieve a goal, but the good ones track the result implied by the goal.
  • Criterion 3: Measures are direct evidence of the goals. The KPIs used by organisations with lower measurement maturity are often the easy-to-get metrics, and tend not to be very relevant.
  • Criterion 10: Measures drive performance-improving behaviour. One of the big reasons that organisations have low measurement maturity is that measures are still perceived as tools for judgement, not for learning and improving processes.
  • Criterion 11: Measures are connected in linked relationships with each other. Relationship links that align performance measures to each other is an advanced measurement concept, so it’s unlikely to be a strength for most organisations.
  • Criterion 13: The users of the measures value them in decision-making. Naturally, this is weak when several of the other criteria are weak too. Poor KPIs are rarely considered valuable.

Needless to say (or is it?), these criteria were also scored lowest by organisations that had no formal performance measure approach. For me, this was the biggest message from the research: most organisations still don’t have a deliberate KPI approach, and they clearly need one.

 

If you want better KPIs, you have to care about the KPI approach you take. Research is showing that PuMP is the best approach.
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  1. Rob Leeming says:

    Hi Stacey,

    The maturity of the business is key to the approach when implementing meaningful measures, and a solid maturity assessment will enable the appropriate approach to be targeted to improve the embedding of the PuMP methodology and development Meaningful Measures.
    Reading comments posted by PuMP practitioners, they have had success by implementing aspects of PuMP methodology to show benefit and get traction for their measures transformation, Hard-To Measure Teams illustrates a different initial approach when implementing PuMP.
    I am looking understand how the Performance Measurement Maturity Score discussed in the “Calculate Your Performance Measurement Maturity Score” aligns with “The Stages of Performance Excellence” within the Hard-to-Measure Teams online training and how the Business measures maturity can influence the way you utilise and implement the PuMP methodology.

    • Stacey Barr says:

      Rob, the hard-to-Measure Teams online training is quite old now, and only available to PuMP Community members like yourself. So the stages of performance excellence in that training has been superseded by the more recent evolution in the Performance Measurement Maturity Score we use now in Step 1 of PuMP. There will be some kind of correlation between the old and the new, but all these models are just models, and none of them can be the complete truth. Use what you find useful.

      • Rob Leeming says:

        Hi Stacey,
        Thanks for your feedback, I returned and reviewed Step 1 of the PuMP Blueprint and can see that the “score” from the diagnostic tool can direct you to move forward to the appropriate step in the Blueprint. Understanding that a link and a clear line of sight between process and strategy is the goal that brings the best out of performance based measurement and enables better business success, what happens if the culture is not quite ready to make the link to strategy but the business wants to bring meaningful measures to process to demonstrate what good looks like to generate traction and support.
        To assist those taking their first PuMP steps or finding their PuMP way, could the Diagnostic include a cultural aspect to better support your comment “Use what you find useful” and illustrate a one sized fits all approach (steps 1 to 8) is not always the way to go.

        • Stacey Barr says:

          I’m not sure I would call PuMP a one-size-fits-all approach with that connotation that it’s more than it needs to be. It’s like the scientific method – its logic and design is the foundation, not matter how large or complex our application is. When a culture isn’t ready for strategy and measurement, then my best advice is to use measurement to help them with something important to them. Like to solve problems they wish they didn’t have. All 8 steps of PuMP can be focused on a single measure to solve a single problem, and when you have a level of skill in PuMP you can facilitate this process lightly for them, without diving deeply into the templates and explanations. Hope that gives you some food for thought, Rob.

  2. Hannelie says:

    I want to know more about PUMP technology

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