Showing posts with label performance indicators. Show all posts
Showing posts with label performance indicators. Show all posts

Tuesday, November 24, 2015

The Truth About KPIs and Other Corporate Bullsh*t

Liz Ryan

CEO and Founder, Human Workplace


If you don't have KPIs to hit on the job, you can say a little prayer of thanks in your head right now. KPIs are Key Performance Indicators. They are yardsticks. They are idiotic, but weenie organizations love them. Measuring things is a lousy manager's favorite pastime!

In our quest to make business and work as mechanical and inhuman as possible over the past hundred years, every position in many large organizations has been sliced and diced into tiny pieces so that each piece can be measured and evaluated against a chart posted on the wall.

 

Some employers use software that tracks their employees' every keystroke and tracks the length of every phone call. 

Other organizations track the number of minutes their teammates spend in the restroom. The more fear-based an organization's culture is, the more things they measure and count.

We treat people at work like production machines, which is not only unethical but stupid,  too.

People are capable of much more than machines are, because people synthesize what they learn and come up with ideas every day if they are plugged into their personal power source at work.

 

They transcend their desk and their job description, especially when a group of people is energized around the same mission.

The only catch is that if people are constantly poked and prodded and measured and yammered at, they stop winning. They stop collaborating. They stop caring.
The goose stops laying the golden eggs.

Every single living person knows this about people, but at work we pretend it's not true. In real life, we know that people are at their best when they're excited about what they're doing. At work we stick our fingers in our ears and say "If you can't measure it, you can't manage it!" like blithering idiots.

 

When people are jointly committed to a big goal that excites them, they are unstoppable. That's why it is stupid to shackle and burden employees by measuring their every move so that nearly all of their focus goes to reaching their daily and weekly goals. Forget about your mission, then! 

How does our obsession with individual performance measurements help a customer or help the world? KPIs spring completely from fear. They have no business purpose at all except to assuage the fear of higher-ups who don't trust themselves enough to trust other people.

 

When employees are treated like machines whose only value is to answer forty customer calls a day and get each caller off the phone within three minutes, they will never give a fig about your company's success. How can you blame them?

They will  never give you anything better than grudging compliance with the rules and standards. Who ever got excited about hitting someone else's yardsticks --  goals that were shoved down his or her throat?

What happens in most organizations when you hit your goals for a quarter or for the year? When you hit your goals, they get bigger for the next reporting period and you don't get a "Great job!" or a pay raise to acknowledge your success.

Work is broken and it is time for us to tell the truth about that. We have foolishly tried to apply junk science to work, and KPIs and the cult of measurement in general are testaments to that foolishness.

 

What makes an organization successful? The effort of its team on behalf of the organization's mission and their own missions is the obvious answer.

That momentum - what we call Team Mojo - is not hard to build. It only takes trusting the people you hired, meaning that you have to trust yourself first.

You have to talk about fear and trust at work to begin to build the Team Mojo level. You have to be honest about things that are going well and things that aren't. You have to name the elephant in the room and stop pretending that you can make your organization successful by hitting little numbers in little cells in spreadsheets.

 

What puts those numbers in those cells, after all? Conversations do. Trust puts the numbers in the cells. That's where your leadership energy should go - toward building the trust level at work, and getting rid of pointless yardsticks that impede the energy flow.

Sadly many leaders can't trust themselves to lead, so they install layers upon layers of rules and measurements, instead. 

We lead stupidly and then we're surprised when survey after survey tells us that employees don't give a dang about their employers' goals. What person with three functioning brain cells would? We have made it impossible for our employees to care.

We've told them that if they cared more than they do about their work, they'd be squandering their flame and wasting their effort, because we don't care about them beyond their production capacity.


The organizations that will win both in the talent marketplace and in the  marketplace for their services or products are the ones who see the connection between passion and performance.

They'll get rid of KPIs and other bureaucratic systems and they'll talk about the mission and the roadblocks in their way to reaching it.

They'll talk about those things every day, and they'll be human with one another at work every day, too. It's very easy to begin. Anyone can start the chain reaction, and the more people who do, the better!

There is a lot of bullsh*t and wasted effort in corporate and institutional everywhere but the good news is that every organization gets to choose for itself how to navigate in this new-millennium workplace. Every individual gets to choose how much of him- or herself to bring to work.

 

You get to be as human or machine-like as you want to be. Working people  get to choose where to invest their precious talents, time and flame. 

We are stepping out of the old religion of data and measurement as keys to the kingdom of success.

Now we know that there is a key, but it's connected to human energy, about as distant a topic as you could find from yardsticks and KPIs. We can focus on human energy the same way we have traditionally focused on numbers, and we must. We can talk about the trust level and the Team Mojo on our teams. 

 

Those things won't show up on a spreadsheet until it's too late to fix whatever has gone wrong. No Employee Engagement survey is going to help an organization that doesn't know how its team members are doing without taking a survey.

Are you brave enough to get step out of the 19th-century, mechanical-business frame and into the Human Workplace?

Everyone gets the same invitation, from the CEO's office to the loading dock. Now is a great time to take a step toward bringing yourself to work. Your flame will grow brighter every time you do!

Saturday, March 8, 2014

Using Performance Indicators to Drive Your Business Strategy - White Paper


 

We’ve all heard the old management adage “you can’t manage what you don’t measure”, but in the world of big data where managers have countless reports and data at their fingertips, the key challenge for companies is to identify what they need to measure and to ensure they are measuring it properly. In many companies, existing reporting doesn’t provide the key data that employees need to identify performance issues and take action. Many organizations have a lot of financial accounting data but only a few measures that relate to strategic and non-financial performance. In many cases there is too much data, but too little information, with no linkage to the strategy of the business. How do you go about fixing this problem?

This article describes an approach to developing and aligning performance indicators with strategic objectives. Other processes, such as developing objectives and measures through a formal contin- uous improvement or ISO program can also be used. There is no single “right” way to decide on the best approach for your business; you need to consider what fits both within your business culture as well as the other systems you have in place.

 

A Balanced Approach To Identifying Strategic Objectives

It all starts with a strategy that flows from the company’s mission, vision and values (see Figure 1). If you do not have a strategic plan for your business, you need to start by developing a plan along with specific measurable objectives. These objectives could cover a broad range of perspectives, including these areas:
  • Internal Processes - streamlining key processes, applying new technology to improve efficiency
  • Environment and Community - support local businesses, community leadership and connecting with future employees
  • Learning and Growth - increase expertise and skills through training or mentoring
  • Financial – revenue growth, asset utilization, cash flow
  • Customer Focus - customer satisfaction, identifying and targeting the most profitable customers
  • Employee Satisfaction - staff retention and positive company culture

Identifying the Right Performance Indicators

Once strategic objectives are in place, you need to ask: what are the critical success factors required to drive each objective? For those success factors, develop a list of potential measures we call “indicators”, which will allow you to track performance. From this list of indicators, prioritize the ones that will have the biggest impact on achieving the strategic objectives. A simple example of how a strategic objective is converted to performance indicators is shown in Figure 2.

In order to measure performance, you must be able to readily obtain the data needed. Therefore, it is important to consider the availability of data, the effort required to obtain it, and any changes to systems or processes needed when selecting your performance indicators. If you are implementing performance indicators for the first time, keep it simple. Use data that is readily available in the organization; if you need to collect new data, ensure the benefit outweighs the cost and effort of obtaining it.


Cascading Objectives AND Performance Indicators to Align the Organization
Cascading your strategic objectives and indicators to all levels of the organization is a powerful way to align behaviour across your organization and improve performance. In order to do this successfully, you must develop indicators appropriate for the level of the organization at which they will be used. The manager or team using the indicator must be able to influence the results within their scope of responsibility. It is not necessary to have indicators related to each strategic objective; only the ones that are relevant to the manager or team. The best way to develop these indicators is to directly involve the people who are responsible for achieving results or have an influence on the outcome.

Setting Targets 

Establishing targets enables you to check if you are on track in reaching your objectives. There are a number of ways to set targets, but the main point to keep in mind is that you want your teams to be motivated to achieve the results.

A target can be set using an external or internal benchmark. External bench- marks are applicable in cases where you have access to published data on industry best practices. Frequently they are most applicable in areas such as cost, quality, production cycle time, sales and marketing. Internal benchmarking involves analyzing internal data to understand where the company performance currently stands in order to set improvement targets. If you do not have the data, it may be necessary to collect it for a period of time (e.g. 3 months to 1 year depending on the measure) so as to establish a baseline.

Stretch targets are a great way to challenge and motivate staff to achieve great results. When setting stretch targets, be sure to break them down into more achievable targets or sub targets and quantify them in a shorter time frame. This will reduce the anxiety amongst staff and help them see what actions are needed to achieve results.

An example of how an objective can be cascaded through the organization, with targets set that are specific to the position in the company is shown in Figure 3. 

Developing Reports and Dashboards
Once you’ve identified your performance indicators and set targets, the next step is to establish an approach to ongoing monitoring and reporting that can be used by managers and teams to track progress. The reporting framework must consider requirements of different levels of the organization and the reporting frequency that is required to support effective decision making.

A simple dashboard, which is a one-page tool displaying the performance indicators, targets, and historical data in a graphical form, can be an effective tool for reporting. The purpose of a dashboard is to provide a big picture view, focusing on the key performance indicators, and draw attention to areas of concern so that mangers can drill down into additional information that is needed to take action. There are a wide variety of software tools available for dashboard reporting; however, existing reporting systems can easily be used to create simple custom dashboards. In designing reports or dashboards, here are few things to keep in mind:
  • Keep the data for each area of the business limited to a single, easy-to-read page
  • Provide context to the data, historical trends and targets help the user to see if they are on track
  • Use graphs or tables that clearly communicate the data
  • Don’t change your reports too frequently, people need time to get used to them

Implementation

If performance indicators are new to your organization, you need to approach the design and implementation process as a change initiative. You should consider building these steps into your process:
  1. Make it a priority – The President / CEO and senior management must support this initiative and ensure there is a sense of urgency within the organization to follow through with this project.
  2. Develop a team – This group should have enough authority within the organization to lead the change and include people from various functions. This team needs to be given the time and resources to develop and implement the program. You may want to include an external consultant or advisor who can facilitate and guide the process.
  3. Communicate – A clear and consis- tent message needs to be delivered to the business on the strategic objectives and changes that are being implemented to introduce performance indicators. This is not a one-time thing; use as many vehicles as possible to communicate the message (e.g. newsletters, staff meetings, workshops and one-on-one discussions with staff).
  4. Empower employees – Involve a broad group of people in the process in order to gain their support and input in developing the performance measures through workshops, facili- tated meetings, or surveys tools.
  5. Plan for and celebrate success - Set targets that are achievable so that people can see visible results from their efforts. Acknowledge and celebrate success, reward people who have been fundametal to achieving the results. Be sure to start this early enough in the implementation process to motivate staff and build momentum.
  6. Keep the ball rolling – Establish an annual process to review and update your performance indicators to align with changes in strategy and set new targets. Continuously improve your approach by introducing per- formance measures to other levels of your businesses, or link it to your performance management system — any time you do this, remember to start at step one in this process.


Annual Review And Continuous Improvement 

Once you’ve established a performance indicator system, you need to revisit and refine it to ensure relevance to the business. This should be linked to an annual strategic plan review and budget setting process. You should review which measures have worked well and which have not; it is especially important to look at which measures need to be changed based on adjustments to your strategic objectives. If you need to develop new measures, brainstorm on the success factors and identify new measures for each level within the organization. Regardless of whether the measures are new or not, you should be reviewing your annual performance and setting new targets for the upcoming year. Once these are established, they need to be communicated to the appropriate level of the company.

Identifying and linking performance indicators to the organization’s strategic objectives provides a foundation for aligning activities across the business. Developing simple reporting tools or dashboards will improve communication, decision making and performance monitoring. Overall, this process will help you to continuously improve your business and adjust your strategy as needed. 

Further Reading:
Kaplan, R., and Norton, D., “Using the Balanced Scorecard as a Strategic Management System”, Harvard Business Review, July-August 2007
Marr, B., “How to Design Key Performance Indicators” Advanced Performance Institute, (www.ap-institute.com), 2010
Pateman, A., “5 East Steps for Developing Your BSC Measures”, Harvard Business Publishing, March – April 2004

Tips for Development Performance Indicators

  • Link indictors to your strategic objectives and align them across your organization for maximum performance improvement
  • Develop indicators that are measurable, simple and easy to understand for those responsible
  • for the performance
  • Indicators must provide meaningful information on progress relative to the objectives
  • Ensure there is a clear definition and precise methodology for calculation
  • Have clearly defined targets that are challenging and motivating, but obtainable with a reasonable amount of effort
  • Review objectives, performance indicators and targets on an annual basis to ensure alignment with the business strategy
  • Stay focused, limit number for each level or area of the business to 10 measures maximum

ABOUT US

McNally Brown Group is a boutique management consulting and business advisory firm that works with companies to improve business performance. We work collaboratively with clients to conduct assessments, develop tools, and facilitate implementation of strategic initiatives in a broad range of areas including strategic planning and implementation of key performance indicators and dashboards.

Monday, March 3, 2014

Using Performance Indicators to Drive Your Business Strategy - White Paper



 

We’ve all heard the old management adage “you can’t manage what you don’t measure”, but in the world of big data where managers have countless reports and data at their fingertips, the key challenge for companies is to identify what they need to measure and to ensure they are measuring it properly. In many companies, existing reporting doesn’t provide the key data that employees need to identify performance issues and take action. Many organizations have a lot of financial accounting data but only a few measures that relate to strategic and non-financial performance. In many cases there is too much data, but too little information, with no linkage to the strategy of the business. How do you go about fixing this problem?

This article describes an approach to developing and aligning performance indicators with strategic objectives. Other processes, such as developing objectives and measures through a formal contin- uous improvement or ISO program can also be used. There is no single “right” way to decide on the best approach for your business; you need to consider what fits both within your business culture as well as the other systems you have in place.

 

A Balanced Approach To Identifying Strategic Objectives

It all starts with a strategy that flows from the company’s mission, vision and values (see Figure 1). If you do not have a strategic plan for your business, you need to start by developing a plan along with specific measurable objectives. These objectives could cover a broad range of perspectives, including these areas:
  • Internal Processes - streamlining key processes, applying new technology to improve efficiency
  • Environment and Community - support local businesses, community leadership and connecting with future employees
  • Learning and Growth - increase expertise and skills through training or mentoring
  • Financial – revenue growth, asset utilization, cash flow
  • Customer Focus - customer satisfaction, identifying and targeting the most profitable customers
  • Employee Satisfaction - staff retention and positive company culture

Identifying the Right Performance Indicators

Once strategic objectives are in place, you need to ask: what are the critical success factors required to drive each objective? For those success factors, develop a list of potential measures we call “indicators”, which will allow you to track performance. From this list of indicators, prioritize the ones that will have the biggest impact on achieving the strategic objectives. A simple example of how a strategic objective is converted to performance indicators is shown in Figure 2.

In order to measure performance, you must be able to readily obtain the data needed. Therefore, it is important to consider the availability of data, the effort required to obtain it, and any changes to systems or processes needed when selecting your performance indicators. If you are implementing performance indicators for the first time, keep it simple. Use data that is readily available in the organization; if you need to collect new data, ensure the benefit outweighs the cost and effort of obtaining it.


Cascading Objectives AND Performance Indicators to Align the Organization
Cascading your strategic objectives and indicators to all levels of the organization is a powerful way to align behaviour across your organization and improve performance. In order to do this successfully, you must develop indicators appropriate for the level of the organization at which they will be used. The manager or team using the indicator must be able to influence the results within their scope of responsibility. It is not necessary to have indicators related to each strategic objective; only the ones that are relevant to the manager or team. The best way to develop these indicators is to directly involve the people who are responsible for achieving results or have an influence on the outcome.

Setting Targets 

Establishing targets enables you to check if you are on track in reaching your objectives. There are a number of ways to set targets, but the main point to keep in mind is that you want your teams to be motivated to achieve the results.

A target can be set using an external or internal benchmark. External bench- marks are applicable in cases where you have access to published data on industry best practices. Frequently they are most applicable in areas such as cost, quality, production cycle time, sales and marketing. Internal benchmarking involves analyzing internal data to understand where the company performance currently stands in order to set improvement targets. If you do not have the data, it may be necessary to collect it for a period of time (e.g. 3 months to 1 year depending on the measure) so as to establish a baseline.

Stretch targets are a great way to challenge and motivate staff to achieve great results. When setting stretch targets, be sure to break them down into more achievable targets or sub targets and quantify them in a shorter time frame. This will reduce the anxiety amongst staff and help them see what actions are needed to achieve results.

An example of how an objective can be cascaded through the organization, with targets set that are specific to the position in the company is shown in Figure 3. 

Developing Reports and Dashboards
Once you’ve identified your performance indicators and set targets, the next step is to establish an approach to ongoing monitoring and reporting that can be used by managers and teams to track progress. The reporting framework must consider requirements of different levels of the organization and the reporting frequency that is required to support effective decision making.

A simple dashboard, which is a one-page tool displaying the performance indicators, targets, and historical data in a graphical form, can be an effective tool for reporting. The purpose of a dashboard is to provide a big picture view, focusing on the key performance indicators, and draw attention to areas of concern so that mangers can drill down into additional information that is needed to take action. There are a wide variety of software tools available for dashboard reporting; however, existing reporting systems can easily be used to create simple custom dashboards. In designing reports or dashboards, here are few things to keep in mind:
  • Keep the data for each area of the business limited to a single, easy-to-read page
  • Provide context to the data, historical trends and targets help the user to see if they are on track
  • Use graphs or tables that clearly communicate the data
  • Don’t change your reports too frequently, people need time to get used to them

Implementation

If performance indicators are new to your organization, you need to approach the design and implementation process as a change initiative. You should consider building these steps into your process:
  1. Make it a priority – The President / CEO and senior management must support this initiative and ensure there is a sense of urgency within the organization to follow through with this project.
  2. Develop a team – This group should have enough authority within the organization to lead the change and include people from various functions. This team needs to be given the time and resources to develop and implement the program. You may want to include an external consultant or advisor who can facilitate and guide the process.
  3. Communicate – A clear and consis- tent message needs to be delivered to the business on the strategic objectives and changes that are being implemented to introduce performance indicators. This is not a one-time thing; use as many vehicles as possible to communicate the message (e.g. newsletters, staff meetings, workshops and one-on-one discussions with staff).
  4. Empower employees – Involve a broad group of people in the process in order to gain their support and input in developing the performance measures through workshops, facili- tated meetings, or surveys tools.
  5. Plan for and celebrate success - Set targets that are achievable so that people can see visible results from their efforts. Acknowledge and celebrate success, reward people who have been fundametal to achieving the results. Be sure to start this early enough in the implementation process to motivate staff and build momentum.
  6. Keep the ball rolling – Establish an annual process to review and update your performance indicators to align with changes in strategy and set new targets. Continuously improve your approach by introducing per- formance measures to other levels of your businesses, or link it to your performance management system — any time you do this, remember to start at step one in this process.


Annual Review And Continuous Improvement 

Once you’ve established a performance indicator system, you need to revisit and refine it to ensure relevance to the business. This should be linked to an annual strategic plan review and budget setting process. You should review which measures have worked well and which have not; it is especially important to look at which measures need to be changed based on adjustments to your strategic objectives. If you need to develop new measures, brainstorm on the success factors and identify new measures for each level within the organization. Regardless of whether the measures are new or not, you should be reviewing your annual performance and setting new targets for the upcoming year. Once these are established, they need to be communicated to the appropriate level of the company.

Identifying and linking performance indicators to the organization’s strategic objectives provides a foundation for aligning activities across the business. Developing simple reporting tools or dashboards will improve communication, decision making and performance monitoring. Overall, this process will help you to continuously improve your business and adjust your strategy as needed. 

Further Reading:
Kaplan, R., and Norton, D., “Using the Balanced Scorecard as a Strategic Management System”, Harvard Business Review, July-August 2007
Marr, B., “How to Design Key Performance Indicators” Advanced Performance Institute, (www.ap-institute.com), 2010
Pateman, A., “5 East Steps for Developing Your BSC Measures”, Harvard Business Publishing, March – April 2004

Tips for Development Performance Indicators

  • Link indictors to your strategic objectives and align them across your organization for maximum performance improvement
  • Develop indicators that are measurable, simple and easy to understand for those responsible
  • for the performance
  • Indicators must provide meaningful information on progress relative to the objectives
  • Ensure there is a clear definition and precise methodology for calculation
  • Have clearly defined targets that are challenging and motivating, but obtainable with a reasonable amount of effort
  • Review objectives, performance indicators and targets on an annual basis to ensure alignment with the business strategy
  • Stay focused, limit number for each level or area of the business to 10 measures maximum

ABOUT US

McNally Brown Group is a boutique management consulting and business advisory firm that works with companies to improve business performance. We work collaboratively with clients to conduct assessments, develop tools, and facilitate implementation of strategic initiatives in a broad range of areas including strategic planning and implementation of key performance indicators and dashboards.