Unraveling the Two Damaging Flaws Undermining Performance Metrics
It’s that time of year when companies start thinking about next year, budgets, and KPIs. That’s Key Performance Indicators to you. And I and their origin is thought to be from Andy Grove, the CEO of Intel during the 1970s.
Nowadays KPIs are as part of the office furniture as fighting with your email inbox. The problem with KPIs is that whilst everyone has heard of them, their understanding is still vague, at best. They know what the 3 letters stand for, but as far as using KPIs as an effective tool, the tool is about as useful as an ashtray on a motorbike.
There are two problems when it comes to KPIs. The first is that we make them woollier than a mammoth and the second is that we write to do’s, not targets & measures.
The Two Problems with KPIs
1- The Woolly Problem
Let’s introduce a second forward thinker, to deal with the woolly. Dr Edwin Locke, who in 1968 wrote the article ‘Toward a Theory of task Motivation and Incentives’. To you and I, this is the S.M.A.R.T. acronym. It’s another very effective tool used badly.
Take any Key Performance Indicators in any company around the world and if it gets a tick against each letter, I’ll eat the motorbike (see previous pun). Yes, it’s that specific – can the goal that you have set for your team member get 5 ticks? One against each letter.
Most get 3.5, at best. It’s hard but worth it because the true test of a KPI is when your team member comes to discuss performance, be it in the outdated annual appraisal, or the regular one-to-one, they should know whether they are achieving their KPIs before they walk through the door. These things aren’t subjective. They are black and white.
2- The To Do’s Problem
The second problem with Key Performance Indicators is that we use the opportunity to share an extensive wish list of tasks we want to accomplish. These are not KPIs. When I was a ready meals buyer I visited a factory with many customer complaints. Walking around the factory I believe I’d nailed it. ‘Put Bob over there to check that and complaints will go down’. Well, they didn’t.
The supplier then said, ‘Well, we did what you said’. I had mistakenly taken the responsibility for the how. This gave the supplier the right to push back. I should have re-iterated the customer complaints target & its importance and not tried to direct the expert on how to solve it. The how.
Good KPIs Follow These Rules:
- SMART.
- Focus on only up to 7 KPIs, as we should remember and derive motivation from them. That is, we won’t ignore them until our appraisal.
- Measure performance. Not the input, but the output. Think Usain’s Bolt Key Performance Indicators – Achieve 9.3 seconds (output). Note that it was not to eat a certain amount each day, run each day, etc. – these are the how and they are a to-do list – The input.
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