The sense and nonsense of KPIs

KPIs. Every organization has to deal with them. By regularly looking at your KPIs you know how things stand and you can intervene when needed. Or can you? Do your KPIs actually measure what they should measure? And are you able to turn the right knobs to make an impact on those KPIs? In this blog I tell you more about the sense and nonsense of KPIs and give you some tips on how to approach them properly.

A KPI for everyone

Steering an organization is no easy task. There are many things to keep an eye on and to manage. Everyone finds certain things more or less interesting, and to make a company successful it is unavoidable that you also take responsibility for things you have less natural affinity with. As your organization grows, it only gets harder to keep track of all the important processes. To keep an overview without being a specialist in everything, many organizations therefore define a set of KPIs to help them steer without having to be involved in the details of every process.

That is often where it already goes wrong. Because which KPIs do you choose? And how do you want to steer with them? If you ask the specialists in your business processes to come up with indicators, chances are you will get management information at a specialist level, with so much detail that you can't see the forest for the trees. If you choose general KPIs at company level instead, you quickly end up with a set that is too generic, one that nobody feels responsible for.

Short and sweet

Everyone actually wants to see something different. Because your organization consists of people with different responsibilities, qualities and personalities, that is perfectly logical. What is essential information for one person to steer on is noise on the line for another. We have all sat through a presentation by the manager or director in which they passionately tried to convince employees that figure A or B was essential for everyone to pay attention to, while a large part of the audience had no idea how they were supposed to influence that figure in their daily work.

Everyone or no one

KPIs are not for the whole organization. And KPIs that cover the whole organization are only relevant to the board. As soon as you bring your 'broad' KPIs lower down in the organization, that figure is only partly, or not at all, a reflection of their responsibility, and its relevance to the recipient decreases. Where 'everyone' is responsible, no one feels responsible.

Less is more

The solution is simple: reduce the amount of information. By giving each department the KPIs that belong to their processes, you make sure responsibility lies with those who influence the result, and that they can actually steer with the information from their KPIs.

The downside of this approach is obvious: before you know it, a jungle of KPIs emerges, and as management you are once again looking at unimportant details in far too many subprocesses. This is where technology can make the difference: by setting up a set of dashboards and filters on your data you can keep such a KPI landscape manageable and clear, and, more importantly, you make sure everyone looks at the same data. That way you can report the revenue of department A to department A, and the revenue of department B to department B, while management, one level up, sees the combined revenue of departments A and B. Your main challenge then lies in choosing what you do not want to see, rather than trying to explain to everyone that their results really do count in the overall figure.

Measure what you need

During that exercise it is also important to consider what you really need. Many of the KPIs we look at do give us results, but do not help us make a decision at all. So think not only about which information you need, but also about what exactly you can do based on that information. And especially as you get closer to operational processes, that distinction is very important.

It can be quite uncomfortable to realize that you actually have no direct influence on that figure you have been chasing for years. But by focusing on what you can influence, you at least make sure you put your energy into the processes where your contribution is noticeable.

Influenceable

When redesigning your KPI set, this is often the biggest eye-opener: by critically looking at the organization's report figures, you discover that a large part of the figures you were looking at cannot actually be influenced, or are merely a result of the processes you can influence. The value of such a setup lies not in the specific KPIs, but in shaping the coherence between them, with which you contribute to your business goal. That way you get KPIs you can actually steer your business with, and you can spend your energy where you make a difference.

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