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The core principles for key performance indicators

Creating core principles for organization measures

Presenting KPI's

Presenting KPI's

What are the principles you take to a meeting when sharing performance measures? I refer to your personal and whole business attitude about the metrics presented. My experience is that a variety of attitudes exist and can be seen from department to department. Let’s explore the business principles driving this variety in personal behavior and attitude. Then we offer some solutions to put them right once and for all.

Before I start my list of principles, let us already assume your business or organization has taken the following bold steps:-

·        Organization vision and mission statement created

·        A strategic plan exists for at least the next 12 months

·        Established a basic set of ethics about conduct, social responsibility and people development.

If your business does not have these in place, please do not waste your time to read further. Instead, bookmark this page and then create them and implement them. Once done, return here to finish this article.

The principle of clear organization communication

Imagine a couple of scenarios. 1) You are in a valley and your phone rings. You answer the call and yet struggle to hear what the other person is saying. Even worse, they struggle to hear that your connection is not solid. You give up on the call in frustration and then try again later, once you know you have a strong stable signal.

10 minutes to make the next train connection

10 minutes to make the next train connection

2) Walking through a train station you are bombarded with high background noise. There is poor quality announcements on the tannoy and a fast changing departures board. You are surrounded by many formal post notices and a myriad of advertisement offerings. You stand there confused with too much information. You need to stand still and concentrate on one important piece of information. You need to make your next connection but it takes time and you feel tension and frustration about the disorganized state of the train station.

The above 2 scenarios are equally prevalent within a business and organization context. The way you communicate through a business is critical to its success. It will directly affect the performance within people and processes. 

A good short read about the importance of communication practice is via this link to the b/p business performance site. 

So the message needs needs to be clear with your Key Performance Indicators (KPI). Avoid overly fancy and complex data visualizations. Instead, focus on messages that the reader can relate to and communicate clearly with others. This principle is a key reason for discovering the range of attitudes to key performance indicators and their data sources.

Top Tip: JAMSO suggests you use the “grandma test”.  This is a test on how can you communicate your point to a hard of hearing 86 year old person with little interest in your subject. If you pass this test then you have done well.

Bonus Tip: Double check for understanding. It is one thing to create what you think is a clear message; it is another to reality to see if it has worked appropriately.

Priority Key Takeaway: - KISS principles (Keep It Simple Stupid) needs to verified and consistent across the whole organization.

Establish clear links with the organization strategic direction

One instant killer against the rise of vanity metrics is ensuring the KPI’s of a business is linked to a strategic direction. This effective point reduces the risk of silo mentalities. You also retain a clearer focus across the business. Another point to combat is experience and gut feel. These are great instincts, yet your KPI’s should become the source from which these feelings emerge.

Finding sense from complexity

Finding sense from complexity

The power of trending analytics can be more important than the actual numbers recorded. An organization with the ability to respond and retain a positive trajectory towards a strategic goal offers new insights and questions than simply reading a specific number. If your performance is flat, what can make a stepped change? If your performance trajectory is positive, how can this be improved and protected to align the strategic direction?

Top tip: Ensure a list of “why’s” has been answered for each metric and management decision. Why is this a priority, why is this needed, why do we need to measure this at all, why is there no other alternative? Check the answers link strongly to the wider organization strategy.

Bonus tip: If the KPI’s do not directly impact the strategic direction in a positive way, replace with one that does.

Priority key Takeaway: - Check the impact your KPI is having on decision making.

Generating True Ownership, Growth and Pride

I know, I know, you have heard it so many times before, have ownership of your tasks. Yet "true ownership" is different. I see people are given “ownership” of tasks and yet find themselves with all sorts of unspecified restrictions after. This is not ownership but leaning more on just responsibility. So, for true ownership of the metrics and key performance indicators, clear rules and parameters need to be understood. Only from those start point’s can the acceptance of scoped ownership grow.

2016 USA Employee Engagement Level

source from AON Hewit

The foundation of performance ownership provides stimulus and motivation. This also establishes pride with work done and growth opportunities. These elements are critical to enhancing the maximum performance and efforts to improve KPI’s.

Without these elements a business simply goes through a process of dull reporting, stagnated development and poor idea creation.

Top Tip: Do not expect cultural change overnight when increasing ownership roles.

Bonus Tip: Consider the use of gamification to help support development and engagement.

Priority Key Take Away: The numbers do not just speak for themselves. They also represent the outcomes from people decisions.

High priority for strategic success

Each business has its unique circumstances and priority needs. To reflect this reality with a sense of timing I previously introduced the Biased Scorecard model. This counter opinion to the balanced scorecard enables a business to focus upon its highest priorities. These priorities change over time and ought to be realistically reflected upon business performance measures such as key performance indicators.

For example, a business within the retail industry might move its KPI focus from sales per square foot to online vs store based sales.

Part of the communication principle needs to be embraced with priority actions. Avoid being perceived as chasing rainbows, shiny objects or short term tactical ideas, ensure your priorities are tightly linked and understood as mission relevant and high impact for success.

Top Tip: Ensure you reflect their difference to Key Results Indicators.

Bonus Tip: Ensure the use of prioritization helps fine tune data measurement scales, frequency and speed/methods for reporting. This helps retain minimal negative impacts and maximize positive gains.

Priority Key Take Away: Focus your KPI’s on areas that are real high priorities. Avoid just to copy standard industry normal reporting KPI’s. 

Performance driven focus

One of the easiest and most critical measures for a business is financial. This is a strong reason why financial performance measures tend to dominate metrics and KPI’s across the world. Indeed the decision on face value makes sense. Yet, successful companies also understand the opportunities and need to focus on performance areas that drive those very financial outcomes. So, instead of a KPI on sales returns, a business may prefer to focus on customer needs analysis as a higher priority.

Be prepared for change

Be prepared for change

This focus on performance and not simply output results helps develop and shape an organization whilst its strategy unfolds.

The improvement of results and outcomes are the results of behaviors, decisions and people. Working on improvement of these areas will provide sustained performance that result in financial reward for the business. Do not be fluffy, be specific with your choice and selection but performance is KING - hence the actual term Key Performance Indicators.

Top Tip: Data quality and their costs need to be controlled yet they are often part of a return on investment and confidence for strategic direction.

Bonus Top Tip: Review current metrics and KPI’s to help redefine actual results measures versus performance measures.

Priority Key Takeaway: Do not take the easy decisions to manage and create key performance indicators; invest the time to define the most impactful ones for performance change within the organization.

Support each other

A little bit of hard questioning in a meeting can unravel hidden skews in information and thus the supporting data for your KPI. Encourage the use of independent, automated and transparent data sets to provide credibility, openness of potential bias and inaccuracy of data. Most people prefer to present absolute numbers and certainty, indeed many leaders demand it. However, offering a more realistic picture of a range of results due to the quality level of data set confidence, will help support the longer term decision and serve best the report readers and business leaders.

For larger organizations a decision needs to be made regarding the actual collection and weighting values of KPI’s. Should the business combine divisional measures or keep them separate? The decision will impact the time, quality and cost of KPI measures plus skew opinions and decisions.

Taking a holistic commercial view on how and why each process supports and impacts other parts of the organization is vital. Supporting each other for success on a process and human level will ease the journey and speed up business mission success.

Top Tip: A true key performance indicator must support as many areas of the business as possible towards a critical target, goal, and vision and objective.

Bonus Tip: Check for the use of behavior metrics that support openness and wider business success.

Key Take away: Focus on 4-10 actual key measures for your business to create your KPI’s. These will be supported from many metrics with a range of accuracy and identification of trends.

Life cycle of measures

Once an action, activity and measure are under control, you should consider its status use and application as a KPI. The purpose of the KPI is to improve a trend and support the strategic direction. Overtime, trends, technology and your strategy will need to be adjusted as a business remains agile in a dynamic market. So be prepared to down grade an existing KPI to a metric and upgrade a metric to a KPI, or create a new one.

The natural 3 phases of measure life cycles are:

Phase 1 Start points:

  • Identification of need and opportunity to measure
  • Selection process
  • Method of reporting
  • Analysis process
  • Behavior change rules based on results

Phase 2 Maturing measure management:

  • Improved data gathering
  • Validated decision making
  • Analysis and process review
  • Communication effectiveness

Phase 3 Moving Forward:

  • Benchmark and consolidate
  • Automate and refine
  • Create alternatives

Top Tip: Periodic review of measures is important but so are automated process steps. So, after a statistically validated number of events over time, consider KPI to be under control.

Bonus Tip: Remain open minded to new technology and data sets that can influence the choice of metrics used. Benchmarking is key to shape leadership insights.

Key take away: Be prepared to avoid classical annual life cycles of KPI’s, if performance is well proven and robust then consider speeding up your strategic direction by replacing with a new more relevant measure.

Beyond principles

These principles are only the starting point. From here, each employee and leader should be encouraged to create solutions and actions to improve the performance of the business strategy through performance behavior measures. The steps of the principles are effective and powerful tools to stimulate accountability and assure strategic growth.

Take a fresh view of existing tools

Take a fresh view of existing tools

I encourage each person that reads this article to take a swift review of your own behavior and attitude. If you adopt these principles yourself then over time your influence can and will shape the organizations you work for. Be prepared to trial and present the principles as a discussion point at work. You may already have some well adopted and others that require fine tuning.

For an extra read, take a review of this Deloitte report on millennials attitudes to work. It reinforces many areas highlighted within our article but with a focus directly on the next leadership generation of millennials. 

Feel free to use these principles as clear guideline principles for all your metrics and results performance management.

Please share this article with at least one other person – that’s how we help more people together.

Written by James Doyle – Managing Director of JAMSO

JAMSO helps companies improve performance. We support your organization  through training, workshops, best practice audits and consultancy services.