Why Does Every Public, For-Profit and Non-Profit Organisation Need KPIs?

by Stacey Barr

If you only have rudimentary knowledge of KPIs and performance measurement, can you still lead a successful organisation?

Confused businessman standing on a road that turns into a question-mark. Credit: https://www.istockphoto.com/

Harald Matzke is our licensed PuMP provider to German-speaking countries. His journey with performance measurement began quite a few years ago, when he used PuMP to transform his previous company, cubus. Harald’s words are the inspiration for this article:

“I’ve been wondering for a long time whether you can run a company successfully if you only have rudimentary knowledge of KPIs and performance measurement. In my opinion, the right set of KPIs is essential to successfully run a business and achieve set goals. I have seen in many companies where only ‘common’ KPIs, mostly from the financial sector, are used. This is not fundamentally wrong, but only mediocre.” — Harald Matzke

I believe that one reason we need good measurement for running any business or organisation is that ambiguity is the enemy of effectiveness and efficiency, and measurement goes a long way to help us remove ambiguity. Evidence-based leaders, like Harald, understand this. But there are not as many evidence-based leaders of public, for-profit or non-profit organisations as there should be.

Do public, private and non-profit leaders alike believe they need KPIs?

It does not matter the size, sector, industry or culture of an organisation. Leaders always have to deal with ambiguity. What continues to baffle me is why, as Harald also observes on the other side of the planet to me, the resistance leaders have to meaningful measurement. Many Measure Up readers observe this too (as I found out by asking them in this survey). Here’s a taste of what they shared:

“The CEO speaks on the importance of focusing on outcomes but insists on measuring milestones, activities and projects.”

“From experience I observe that many managers don’t dare to show explicitly their accountability… They think that it is enough that they work intuitively.”

“My workplace is a university. I am puzzled why leadership who also work in the knowledge sector (teaching and research) resist performance measurement. My theory is that the political or social agenda outcompetes the evidence based approach in most cases.”

“My organization rewards many other behaviours (working harder, shiny launches, etc), but not evidence of real improvement.”

“Leaders are looking for the holy grail of performance measurement, but don’t know enough, nor have thought it through. The result is they measure the usual (outcome) financial metrics. ”

“The only time the leaders really talk about our measures (particularly strategic measures) is when the results are showing strong improvement.”

In that survey, 68% of people said their leadership teams were resistant to better measurement. The top 3 reasons for this resistance that they most commonly shared were:

  1. The leaders don’t really understand what good performance measurement is.
  2. The leaders put more emphasis on accountability and compliance than on performance improvement.
  3. The leaders focus too much on activity and milestones, and not nearly enough on results.

This experience is not rare. My PuMP Partners and I have seen the same patterns in leadership teams, in hundreds of organisations, all over the world, and for many years. The vast majority of strategy and performance professionals, data scientists and quality practitioners, and improvement-oriented employees sincerely want to see better measurement in their organisations. But more often than any other obstacle, leadership resistance is in their way.

Can we reduce leadership resistance to better measurement?

If your leadership team resists better measurement, it’s worthwhile to test more deeply for the reasons for their resistance. It will always boil down to their worldview and values, and the level of KPI consciousness they consequently may have.

But a few practical ideas to help your leaders appreciate why their public, for-profit, or non-profit organisation needs KPIs, include these:

There is still more to learn about why public, for-profit and non-profit leaders resist better KPIs. Maybe you can help shed more light on this subject? I would love your answers to the two questions in my survey:

    1. How agreeable or resistant to better measurement is your leadership team?
    2. What’s your best guess about why they are agreeable or resistant?

If you want to add your experiences and thoughts (this article will update again in the future to include them), then please do so here:

https://www.surveymonkey.com/r/kpiresistance

Every type of organisation needs good measurement because ambiguity is the enemy of effectiveness and efficiency, and measurement goes a long way to removing ambiguity. [tweet this]

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