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KPIs – Key Performance Inhibitors and a method to transform theses back to Indicators

Blog: Brian's Blog - Enterprise Strategy, Architecture and Management

This month I am dividing my time between several initiatives at work:

Technology development activities
Process adoption
Metrics definition
Skills transfer

A rather interesting and eclectic combination of activities. But as I started to ponder these I started to reflect on the metrics definition activities of past and the relationship to other initiatives on my list. My goal is to create a suite of KPIs for my group that is useful in advancing our success. With that premise several things come to mind.

KPIs or metrics that truly indicate how the organization is progressing to its goals; rather than those fool us into believing we’re doing well when we’re not
KPUs that the organization believes in; that is, we have control in positively effecting these and can relate to achievement of our goals
KPIs that are diagnostic; they provide insights to help us determine what we can do better

This is a tall order considering people often are suspicious of how measurements are used. Especially if such has been used in the past not as guidance but justification for other agendas. This typically results in KPIs that are meaningless but always show green, even in the face of disaster. Such have a witnessed before within sales organizations that measured success by size of backlog rather than quality of backlog or customer satisfaction. This eventually became a game of musical chairs with the unlucky sales rep. at the end of the cycle taking the hit for a bad backlog he had nothing to do with.

Based upon such experience, my belief is that KPIs need to be a serious discussion and negotiation between all levels within the organization. Staff must believe that these measurements are able to be influenced by their actions; Management must believe these measurements indicate status of the journey to goal achievement.

These seem simple enough, except that the altitude that each party operates at is different. If you’re a Senior Executive you’re often looking at corporate performance: profit/loss, customer satisfaction, market share, etc. If you’re a programmer in IT you’re focus is on cost and time of delivering an application, response time of system, uptime, etc. This difference in metrics can and often does create misalignment between management and staff.

The results of which is often KPIs become Key Performance Inhibitors as staff become disillusioned with measurements as they can’t relate their measurements with goals management focuses on rather than how their measures relate to business measurements.

This conundrum can be address with a method called Hoshin Planning. Hoshin Planning is nothing more than a cascading set of matrices of goals, strategies, and measurements that relate one altitude of measurements to another. While the technique works well, it does require additional effort between management and staff to be explicit about the goals, tactics and measurements as well as reasonable in setting measures and targets that assignees believe are achievable. This however, is not a simple twenty-minute exercise and like all planning requires constraint revision in the light of new information (i.e., planning forecasts are not accounting transactions).

Filed under: Adoption, Organizational Change, Performance Management