There is one thing about KPIs to always remember
KPIs are Key Performance Indicators;
not the ultimate panacea of perfect business
KPIs can really be powerful when used in conjunction with other tools and methods they can transform businesses, however by themselves they are not superheros.
I often hear people saying “once we get our data warehouse, and report on KPIs, all will be well”; and I have been hearing this even more regularly of late! Every single time I have a niggling feeling this expectation is unlikely to eventuate unless some extra work and factors are used.
Lets start back at why KPIs are popular – they deliver to the maxim “What you measure you can manage“
For years and years I have been a firm believer in this adage until recently when I realised, in three different circumstances, great measurements do not ALWAYS lead to better management.
Now, maybe this has something to do with these businesses measuring the wrong things, I recognise there are many soft skills and qualities that are non-quantifiable, these are important factors in managing that may be difficult to measure. But I actually believe the real issue is something quite different… The tech bubble explosion in the late 1990s; the GFC – they all had very clear measures and indications things were “not as they should be”. Even at a more micro level with businesses I know and who are very good at measuring, are having some challenges generating improvements – perhaps they were measuring but not managing?
For a KPI to be powerful they need to enable easy decisions and instigate action:
- Things are looking bad: Decision = need to investigate, Action = ask for more information
- Things are looking good: Decision = need to investigate, Action = ask for more information
- Things are on Track: Decision = no need to investigate, Action = none required
Asking for more information is also not exactly ‘managing’; managing is about handling, directing, and controlling. However, making sure the right supporting information is available, will enable management to manage effectively.