The 2018 MIT Sloan Management Review and Google’s cross-industry survey* asked senior executives to explain how they and their organizations are using KPIs in the digital era. It is probably the largest survey on this topic with more than 3,200 senior executives providing feedback and supported by in-depth interviews with 18 selected executives and thought leaders. This study found that the measurement leaders, the highest-performing group, in the survey sample:
- Look to KPIs to help them lead—to find new growth opportunities for their company and new ways to motivate and inspire their teams.
- Treat their KPIs not simply as “numbers to hit” but as tools of transformation.
- Use KPIs to effectively align people and processes to serve the customer and the brand purpose.
However, this study lost its way when it confirmed a common misunderstanding by defining KPIs as:
The quantifiable measures an organization uses to determine how well it meets its declared operational and strategic goals.
This definition is flawed on several counts:
- Measuring progress on the journey to reaching the strategic goals is done by periodic reporting, which will seldom lead to profound alignment of people and processes.
- It makes the time-honored mistake that all measures are KPIs. How can this be? In the study, the writers acknowledged that “most companies do not deploy KPIs rigorously for review or as drivers of change. In practice, KPIs are regarded as ‘key’ in name only; the most prevalent attitude toward them seems to be one of compliance, not commitment.” The words “key” and “performance” are linked together so that the measure is one that will lead to customer delight and improved financial performance
- Reporting progress against goals is necessary, typically done monthly, and is not the real driver for alignment that we seek. I have yet to see a monthly report that ever created any change. We need 24/7, daily, and weekly warning flags which encourage timely corrective action and thus the monthly progress report should only confirm what we already know.
* Michael Schrage and David Kiron, “Leading with Next-Generation Key Performance Indicators.” The 2018 MIT Sloan Management Review and Google’s cross-industry survey, Research Report.
This information has been extracted from David Parmenter’s Key Performance Indicators (4th Edition) Pages xxx-xxxi, which is the highest rated KPI book on Amazon.
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