I read today, with dismay, a well know accounting software company issuing guidance on KPIs for a particular sector. Shakespeare summed it up perfectly when Macbeth said, “_ a tale told by an idiot, full of sound and fury, signifying nothing.” They have a lot in common with those, many centuries ago, who were believers of a flat world.
At the same time, a customer from the UK had ordered my KPI Toolkit (SMEs 100-250 FTEs) – a whitepaper + e-templates + KPI database. So, I thought I had better improve the lead into the paper. Here is the new piece.
There are a number of reasons why there is such a large misunderstanding with; the characteristics of KPIs, how to design and report performance measures and finally, how to get them to improve performance. The problem principally stems from these factors:
1. There is no formal education on performance measurement.
Performance measurement has been largely left an orphan of business theory taught by the tertiary sector.
2. The time-honoured mistake that all measures are KPIs.
In practice, KPIs are regarded as ‘key’ in name only. Surely there must also be measures where the ‘K” is not required. This now gives us two types of measure, a KPI and a PI.
3. Too many of the wrong measures.
Organizations using the balanced scorecard approach frequently end up with 200–300 measures. Return on capital employed, revenue per employee, customer and employee satisfaction have never been KPIs. I call them Key Result Indicators as they are a result of many teams working together.
4. Measuring far too much at the bottom of the cliff, on a monthly basis.
Organizations rely too much on “bottom of the cliff” monthly measures that are too late to change events. It is clearly better to catch problems early on (at the top of the cliff) rather than measure their impact in the monthly report. By measuring 24/7, daily, or weekly.
5. Calling monthly measures KPIs.
How can a measured reviewed monthly, well after the horse has bolted be key to your performance? I do not believe there is a monthly KPI on this planet. If a performance indicator is key to the well-being of an organization, surely you would measure it as frequently as possible.
6. Linking pay to KPIs in the misguided belief that it will increase performance.
You will merely increase the manipulation of these important measures, undermining them so much that they will become “key political indicators”.
7. Using consultants to deliver a KPI or balanced scorecard project.
Peter Drucker observed that many new initiatives failed as the wrong people were leading them. He said, “never give a new project to a new person”. The KPI project is an inhouse job and should be delivered by a team full of staff with a large stack of ‘IOUs” they can call on.
8. A lack of C-Suite commitment to KPIs
Dean Spitzer[i] says, “Only when the CEO is passionate and knowledgeable about measurement will you have the opportunity to get twenty-first-century measurement to work effectively and efficiently.”
Next steps
- Read my KPI articles on my KPI webpage
- Purchase my KPI Toolkit relevant to your size of organisation (under 100, 100-250, and over 250 FTEs)
- Deliver a compelling ‘Killer’ presentation using the presentation kit included in the Etemplates that are included in the KPI toolkit.
[i] Dean Spitzer, “Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success” AMACOM, 2007.