Mid level managers can use this as a “thinking” template to help create and realize KPI’s.
What is the raw idea for the KPI’s
Make notes about what problem you are trying to address with the KPI.
Why are you thinking about developing a KPI ?
Don’t get too detailed.
Details will emerge from the process below.
Just rough thinking here, review later.
Generic Steps to achieving KPI’s
- Review the existing (and maybe informal) KPI
- Map the processes and understand them thoroughly
- Explore the existing data and what is already being measured
- Identify what process steps have the most affect stakeholder satisfaction
- Identify Negatives – what gives the stakeholders negative feelings – helplessness, voiceless, defrauded, victimised
- Identify positives – what makes the stakeholders feel aligned with the company’s vision mission and execution
- Plan how staff executing the process can behave differently to reduce negatives and increase the positives
- Train staff in new behaviours
- Identify how to measure staff execution
- Identify how to measure client change indicators
- Do a measured data gap analysis
- Measure what is needed to be measured to fill the data gap
- Track KPI over time
Why do we do the things we do –
Map the process
Use Draw.io and a swim lane diagram to make a flow chart of the process.
Document the process from the flow chart
Be sure to define the starting triggers and the endpoint(s)
Is the process map agreed by all players including clients?
Analyse and optimise the process
Are there boundary issues?
Are there delegation issues?
Eliminate obvious redundancies
Try to find opportunities for parallel rather than serial processing
Identify control points and approval points
What matters is what’s measured
What can be measured
What is easy to measure
What measurements are directly indicative of outcomes.
Think about using recognised measurement methods. For instance,
- Net Promoter Score (NPS),
- Customer Satisfaction (CSAT),
- Churn rate, Retention rate,
- Customer Lifetime Value (CLV) or
- Customer Effort Score (CES)?
First, do no harm
Do not “throw out the baby with the bathwater” or break existign imperfect but working systems in a quest to find “perfect” systems.
What is in place
Is there a proactive (or any) plan ?
Is there a planned response to stakeholder issues ?
Is there a record of stakeholder touches?
What is foreseen / planned but not implemented
What/who is blocking implementation of the foreseen and planned?
Time is of the essence
Where does staff time go?
Is more staff time needed?
Are there efficiencies to be made?
Doing the completely impossible with nothing at all – Scalability
Can more be achieved with fewer resources?.
What can be automated efficiently?
What can be outsourced efficiently?
What ratios are set in concrete?
Refine the raw KPI(s) in light of the above.
The purpose of having KPIs is to help deliver good long term company wide results.
KPIs always reflect strategic value drivers. Metrics may represent the measurement of any
Good KPIs possess these characteristics. All metrics may exhibit some of these characteristics, but good KPIs possess all of them.
KPIs Reflect company strategy
KPIs reflect and measure key drivers of business value. Value drivers represent activities that, when executed properly, guarantee future success. Value drivers move the organization in the
right direction to achieve its stated financial and organizational goals. Examples of value
drivers might be “high customer satisfaction” or “excellent product quality.”
Good KPIs are “leading” not “lagging” indicators of performance. In contrast, most financial metrics (especially those found in monthly or annual reports) are lagging indicators of performance.
KPIs Are Defined by “Executives” and refined as they Cascade throughout an Organization
Every group at every level in every organization is managed by an “executive” whether or not
the person carries that title. These executives may be known as “divisional presidents,”
“managers,” “directors,” or “supervisors,” among other things. Like the CXOs, these
“executives” also need to conduct strategic planning sessions that identify the key value
drivers, goals, and plans for the group. At lower levels, these elements may be largely defined
and handed down by a group higher in the hierarchy.
However, in every case, each group’s value drivers and KPIs tie back to those at the level
above them, and so on up to the level of the CXOs. In other words, all KPIs are based on, contribute to and tied to the overarching strategy and value drivers. In this way, toplevel KPIs
cascade throughout an organization, and the data captured by lower level KPIs roll up to
Corporate wide KPIs. This linkage among all KPIs, which can be modeled using strategy
mapping software, supports flexible analysis and reporting at any level of granularity at any
level of the organization.
KPIs Are Based on Corporate Standards
The only way cascading KPIs work is if an organization has established standard
measurements. In some cases, organizations can only agree to disagree and use metadata to
highlight the differences in reports.
KPIs Are Based on Valid Data
Unfortunately, knowing what to measure and actually measuring it are two different things. Before managers finalize a KPI, they need to ask a technical analyst if the data exists to calculate the metric and whether it’s accurate enough to deliver valid results. Often, the answer is no! In that case, executives need either to allocate funds to capture new data or clean existing dirty data. Or, revise the KPI.
Providing cost estimates for each approach is necessary for deciding the best course of action.
KPIs Must Be Easy to Comprehend
One problem with most KPIs is that there are too many of them. As a result, they lose their power to grab the attention of employees and modify behavior. A usual number of KPIs that organizations deploy per user is seven. # would be better. More KPIs than this makes it difficult for employees to peruse them all and take requisite action.
KPIs must be understandable. Employees must know what’s being measured, how it’s being calculated, and, more importantly, what they should do (and shouldn’t do) to positively affect the KPI.
KPIs Are Always Relevant
To ensure that KPIs continually boost performance, you need to periodically audit the KPIs to determine usage and relevance. If a KPI isn’t being looked at, it should probably be discarded or rewritten. In most cases, KPIs have a natural lifecycle. When first introduced, the KPI energizes the workforce and performance improves. Over time, KPIs lose their impact and should probably be revised. Review and revise KPIs quarterly.
KPIs Provide Context
Metrics always show a number that reflects performance. But a KPI puts that performance in context. It evaluates the performance according to expectations. The context is provided using thresholds, benchmarks and targets.
KPIs Empower Users
You can’t manage what you don’t measure. It’s important not to link incentives to KPIs until the KPIs have been fully vetted. Often, KPIs must be tweaked or modified before they have the desired effect.
It’s also critical to revamp business processes when implementing KPIs. The business process
needs to empower users to take the appropriate action in response to KPIs. The last thing you
want is informed but powerless users. That’s a recipe for disillusionment and poor morale.
KPIs Lead to Positive Action
KPIs should generate the intended action—improved performance. KPIs must work across the whole organisation and not undermine or dump work across divisional boundaries. Human nature suggests people will always try to circumvent KPIs and find loopholes to minimize their effort and maximize their performance and rewards. Good KPIs are vetted before deployed and closely monitored to ensure they engender the intended consequences.
Back up notes
Use SMART Goals wherever possable
- Is your objective Specific?
- Can you Measure progress towards that goal?
- Is the goal realistically Attainable?
- How Relevant is the goal to your organization?
- What is the Time-frame for achieving this goal?
Watch Simon Sineks “Why and How” video
Develop dashboards for KPIs
Remember some KPI dashboards only describe existing or past phenomena, and miss being able to predict future events based on past data and then prescribe a course of action.
Dashboards show you where you have been and need analysis and thought to show you where you are going.