That’s no typo error. Key Results Indicators (KRI’s) are often confused as Key PERFORMANCE Indicators (KPI’s). Here is an overview of why you need to understand the differences and when to use KRI’s.
If I ask a business to show me their KPI’s they often include KRI’s amongst the list and display. But why should we even bother seeking to understand the difference? Is this not an academic geeky opinion that we need to differentiate between KRI’s and KPI’s right? No. The difference is important for mangers and leaders. Generating optimal strategy and decisions are natural outcomes from this improved awareness and application.
The principle difference between performance indicators and results indicators is simple. Results indicators (including KRI’s) informs and records what has happened. So, a financial result or the total number of quotes issued by a business. What is missing from these numbers is how the results were attained and why the result occurred.
Example: A business measures the number of produced table clothes on a daily basis. This key result indicator (KRI) shows the results running at a steady result between 10,000 and 10,400 table clothes a day based on their 6 hour working shift.
The same business might wish to concentrate on other indicators and metrics to achieve the results. For example, measures of personal productivity, material availability, maintenance uptime availability of machinery, quality control parameters. These performance metrics provide deeper insights to a business than the end KRI.
Creating insights with traced quality data
If you have poor data quality then expect poor quality decisions. It is surprising how many operations and business areas spend so much time chasing results without investing the time to create the foundations of solid quality data sets. These errors start as innocent oversights. Examples include incorrect;
using average figures instead of range and actual raw information.
I find that many data source errors occur from managers or workers seeking to feed reports with ease as opposed to insights.
Your raw data is the measures that matter for developing skilled decisions with accurate and robust grounds. How do you ensure decisions are verified not just from metrics (summarized information such as performance indicators as % or ratio etc.)? This sounds counter intuitive at first. Why would I be suggesting reviewing the raw data when you already have a metric that summarizes it?
Well the answer is about creating a solid basis for all decisions you need to be able to trace your decisions fully. For instance a marketing strategy could be improved even further by generating the optimal data oversight and understanding basic statistical errors in the original data sets.
Selection of keys
Do you have a bunch of keys that look the same? It is annoying when trying to open a door in the dark, when it is raining or you have your hands full and trying to get inside. The same frustrations can be felt by managers seeking the correct insights.
This is perfectly normal, so the approach to take is a matter of analysis and then correct selection for a solution. One of the important areas a business seeks to control and monitor is the highest priority areas for its success.`
In today’s ever connected world and greater data gathering power there is an increasing burden among workers and managers to be in control and measure as much as possible. All these trends are fine until they hit productivity. If you spend too much time measuring and monitoring then the time lost time is a serious consequence. That time could be invested with true leadership with your staff. Take a read of this article from Fast Company suggesting to spend 6 hours a week with employees.
Running a business strategic review or audit on a periodic basis is a fantastic method to define the core important measures, metrics and key performance and key results areas. Some of the guides to help this review include the ever popular balanced score card system and the JAMSO biased score card system.
Even modern analytics tools that power and help measurement management it can be too easy to slip into an overabundance of metrics. Care should be taken to define and communicate the clear key critical areas for business success and regulatory obligations.
The key to a leaders success
A great leader and manager is not a person that often has all the answers to problems, but a person that knows where and how to get the information to generate the insights to challenges as they occur. So, an effective manager will organize data collection and measures that help provide deep insight opportunity. This can be from basic data quality tagging through to critical functions and safety process measures. The recognition that not all data is instantly available and creating a risk/tolerance band helps with measures cost control.
Indeed, a great manager will avoid too many metrics and KPI’s. They focus on clear directions that match the business vison, strategy and principles instead of an impressive collection of dashboards that no one is taking any notice of.
- Reporting by exception in a world where more and more data is available helps develop accountability, responsibility and improves empowerment of staff. The logical outcome is a higher engaged workforce which in today’s business climate continues to be a strong pursuit for most companies.
- Creating your own measurement systems may be required from time due to cost control and the uniqueness of your combined process steps. Read here to learn how to create your own measurement system.
- Performance indicators are simply that, they are performance indicators and not all should become key performance indicators.
Managing results through performance.
Everything that is said to be completed is a form of result. This can be at physical, time or event level. These completed outputs form your results and results indicators. Important areas such as sales will be shown as a Key Results Indicator. Your results are the completed outcomes from a range of performance areas so their insights provide at a process and system level the overall value of contribution. To influence these values managers can influence the activity and combined output from a range of specific performance actions.
C level expectations
The C level (term often used for Chief or top executive level) will often talk about expecting results and measure results from the areas of the business. These absolute expectations drive culture and effect strategy. What managers often fail to consider is that the combined output of many of their KPI’s will drive the end KRI result. So, retaining a focus on the KRI and the weighting level of impact each metric and KPI has upon it can help the business focus effort, resources and define priorities towards expectations and success.
The task of an effective manager is to ensure the C suite not only focus on KRI’s but also understand the impacts they have upon ethics, principles, priorities and motivation. If all the checks and balances remain OK then ensure the leadership also gets a pat on the back for retaining core values. What cases spring to your mind where you have seen senior leadership simply focus on the results and not the impact it has on other performance areas? This is the difference between cause and effects when pursing goals.
Measures Data level $, Averages, Ratio, Numbers
Metrics Calls, visits, comments, products available
Performance Indicators Service hours available, benchmark quality of products
Key Performance Indicators % Increase of customer retention, Avg. closure rates
Strategy Customer Experience, Sales Training, Social Media Engagement
Key Results Indicator Gross Profit
Communication roles with measures
What is affordable to measure changes over time due to advanced technology and services? One of the most important elements about measurement collection is the communication methods surrounding them. I always suggest you review the rights to privacy and review your code of ethics before making significant changes to data collection and measures. Amazon for example suffered heavy negative press for its deep measures of its workers. So the importance to show empathy for individuals is important plus the consequences upon motivation and team spirit.
Such leadership compassion need not lack the drive and enthusiasm to create optimal insights with positive intent. Consider using the tools such as gamification to help develop improved measures for process and systems plus personal behaviors.
The core purpose for any measure should be to create common understanding of actions, activities and behaviors using the best tools. The use of data visualization tools help gain insights that everyone can understand is a powerful method to generate relevant oversights and identify any potential conflicts of interest with others.
The role of leading and lagging measures
It may come as no surprise when I say we live in the present; however it can often be a surprise when looking at many business metrics to see we seemingly has more of a passion for the past. That is to say, that lagging metrics such as Results are the ones that create the clear focus. The reason for such an obsession is clear and obvious.
- Lagging metrics are easier to measure
- There are fewer disputing facts than historical evidence
Lagging measures are great at informing us where we have been and when we got there. Leading measures are harder to measure; they derive from expectations and anticipate future expectations and outcomes. A research and development department may have a lagging metric for the number of new product innovations but a proactive business might prefer to measure a leading measure of advancing the customer experience to a future point of high satisfaction.
The impact to businesses that have too many leading or lagging metrics is clear. At best a form of dynamic tension is important to establish a balance between current and historical needs plus future ones. Key Results Indicators clearly fall into the camp of lagging metrics – do not forget it!
Does your business seek improved behavior change that can self-correct? Using advanced analytics or even some basic excel on measures can improve management decisions if the correct leading or lag metric is defined. So, do not become obsessed with the numbers, become hooked on the trends, speed or change and which type of measure will help you achieve more goals.
Accountability for business outcomes
That accountability word pops up a lot when I write about metrics. Too often I have seen managers look at each other or even skip metrics simply because it was too hard for them to pin down who was accountable. The positive news for leaders is this can be solved quite simply. Creating maps of metrics, measures and performance data sources is a great time to also define and update the responsible areas each person is accountable for.
The leader of the IT department may find itself accountable much more than IT if the importance of their supplied and gathered data is critical in other business function areas. For instance the productivity measures for a production line might be best placed under the maintenance and service managers than the product manager’s roles.
If a gap is defined in accountability then clearly this is a leadership role to define it, so that metric goes back up the chain as far as the CEO if needed. So, “the buck stops here” mentality should be embraced as long as it is supported and joined with the appropriate level of empowerment and resources to support it.
The management of management is the leadership’s role and should set clear but fair expectations. This includes the mutual understanding of data access and availability. We currently live in a society where insights and data are expected almost instantaneous. So, a leader seeking data at 5.50pm should have the same support as if they asked at 8.45am right? Well, only if that data set can be sourced automatically and uses the power of secure on demand data sources. This acknowledgement and sensitivity to work life balance has been seen with recent changes across Europe.
With these changes in business culture the need for faster insights to key results areas increases. What used to be a monthly report became a weekly one, and now daily or on demand. For ambitious managers there is the desire to help leadership with these fast insights, so being reasonable with the consequences of these requests is as important for the leader and manager alike. Navigating these delicate areas is not easy and so investment to automated services where possible is an obvious solution. In the meantime the words compassion, emotional intelligence and ethics will continue to surround the topic.
No expectation remains the same
During the peak periods of recent venture capital, a startup business may have a key results indicator that focused on topline sales growth. Uber is one example amongst many others across a range of industries not least such as fintech and insurtech. However during the latter part of 2016 the same investors changed their focus to shorter term profit results. This is the clear reality to be considered with all your KRI’s.
The shareholders may change and so therefore their expectations and priorities. We see this from natural business cycles through to external events such as regulation, competition, technology change such as machine learning and artificial intelligence. Other impacts include currency fluctuations and other PEST (political, economic, social, technological) impacts. All these areas can produce new threats or opportunities and priorities for your business. Therefore the key results indicators of the business should consider these impacts and change accordingly.
Resistance to reporting change is interesting and provides insights to the business culture. Demoting a metric from KRI to a standard RI (results indicator) can highlight leaders attitudes to change and silo mentalities. Creating an open and more diverse minded leadership board will help keep the business agile and undergo periodic performance and strategy review.
Summary and clear next steps
No matter the size or phase of your business, is it a small startup or large global corporation with several thousand employees key result expectations will exist. Creating an overview of normal results and specific key results is important on an ongoing basis for a business. These set the priority and influence the culture of the business. Many key results biased on pure financial figures will produce a different type of business model and culture than one focused with environmental and developmental focus outcomes.
There is a lot of talk amongst companies about the need for change management yet a lower willingness to embrace therefore the need for key results indicators reviews and adjustment. The connections through the whole business should help create the best design ingredients from measures to performance indicators.
This article high lights the need to maximize and optimize value and potential insights from data. A key message is not to take your measures for granted but used them for maximum insight value.
Using existing and new techniques to gather quality data helps a business thrive and utilize its information. This becomes ever more critical if a business is to compete and embrace a world with increased use of analytics, machine learning and artificial intelligence. There will become a future critical phase where middle management will see threats during this change so it is important leader’s drive the change through using KRI’s as a clear objective.
I see the role for consultants to increase as we see core elements from gamification and market change offer new opportunities and threats to a business results.
The future planning of your business should therefore always seek to define a wider purpose and meaning to help carve its unique market proposition and link these to KRI’s.
You now should be fully aware and capable to explain the difference between kpi and kri to others. Please share this article across at least one of your social media platforms that help us get the message and awareness to our future potential clients.
I suggest you review you current dashboards, balanced score card, and take an audit to see how you can now improve your company measures to meet future market demands and shareholder expectations.