Not everyone wants to (or indeed needs to) throw out their existing measures just because they aren’t perfect. To make sure you don’t throw the baby out with the bathwater, evaluate your measures using the following simple checklist and you might be surprised at the ideas you get to improve your not-quite-right measures, and cast a keener spotlight on those measures that really should be thrown away.
Oh, and a word of warning: No list of criteria is ever complete or ever totally correct. So as you read these and apply them, tune into the purpose of the criteria if the prescription just doesn’t fit.
1. Does it have clear link to strategy?
For your measure to be excellent, it must have a clear line of sight to your business direction – to your strategic goals or priorities. If you are measuring something and improving it won’t make any significant contribution to achieving your strategy or goals, do you really need to measure it? (Idea: design your measures at the same time you formulate your goals.)
2. Is it owned by someone?
Unless your measure is officially owned by someone – not a department, not a team, but a person – it’s super likely that it isn’t being used to make performance improve. It may not even be properly reported. Measures need an owner to make sure it is reported and used for the benefit of the business. (Idea: find a person who has enough authority to respond to the measure.)
3. Can it be brought to life?
Vague ideas, surveys and kooky acronyms are not measures. A measure needs to be spelled out in enough detail that you can know exactly how to calculate it, how often and from which data. (Idea: define the details of bringing your measure to life to test its viability.)
4. Are you able to track it regularly over time?
Before and after measures (which is what annual measures usually end up being) don’t give enough feedback to manage improvement efforts. Your measure must be tracked regularly enough (such as monthly or weekly) to give you clues about whether your improvement efforts are working, before it’s too late. (Idea: measure more frequently or find a lead indicator that you can measure more frequently.)
5. Does it give you more value than it costs?
Measurement doesn’t happen for free. But you need to be confident that the costs associated with its design, data collection and reporting are less than the benefits it brings to your business, which is usually through decision making and the resulting improvements you get for your bottom line or your stakeholder value. (Idea: remove waste and duplication from data collection and reporting, e.g. use sampling instead of measuring it all.)
6. Do users understand it?
If your measure is a convoluted index of other measures, or it’s calculation is difficult to explain in everyday language, it can make using it too daunting a job. (Idea: borrow from Ockam’s Razor and find the simplest measure that can convey the needed information.)
7. Does it inspire the right behaviour?
If your measure is not encouraging people to choose performance-improving behaviour over sweep-it-under-the-rug behaviour, it’s a candidate for throwing out. The measures that are the most potent in improving business performance are those that make it obvious – even unconscious – the right actions to take to get better performance results. (Idea: involve staff in designing the measures so they have more understanding and buy-in.)
These seven criteria are a good basis to judge your measures. You might like to make up a grid with your measures listed down the rows and these criteria listed across the columns. You can then do a quick evaluation of your existing measures, and see at a glance which to keep, which need some work, and which should probably been thrown away!
Thanks, Stacey. My associates and I are assisting a client in getting to selecting “real” KPIs that can be used to drive behaviours. We are endeavouring to pry the many ‘useful’ metrics (in an analysis sense) that threaten to choke the life out of the firm – out of the hands of a small group of vocal specialists. We have a good idea of what metrics are needed to execute the business at the front line – and will focus on them. Of course, behaviours at the front line are responsible for 80% of the company’s performance. Thanks for the words to support our efforts
Ken, great to focus on the metrics you know will be useful in a practical way, helping those doing the day to day work. I’m always curious why some people think that more metrics is better than few. Best of luck!
Thanks Stacey for this list. I do a Phd about OHS scorecard and indicators and i have a question about the difference of meaning between “measure” and “indicator”. Because, to me it sounds like the same thing regarding your article. I think everywhere in your article, the word “measure” may be switch with “indicator”. From my french point of view, I think english speakers often mix up this 2 concepts. In your opinion, whats are the conceptuals differences between this 2 things. Thank you again.
Great overview Stacey. Two other criteria I always include:
1. the importance of ensuring that the KPI Dashboard includes both leading and lagging metrics. Lagging metrics are plentiful, but only give us a look at historical data and allow us to be reactive. Leading indicators are the key to seeing what’s coming and allowing the team to be proactive.
2. Once you’ve identified the the KPIs that tie to your vision and key strategic objectives, sort them to see which category they fall into: P&L/Cash, Productivity, People (employees, customers, vendor quality/engagement). There is a tendency to end up with lots of the first two, and not enough (or sometimes any!) People KPIs to balance priorities. Since the people side competes with productivity & P&L for resources, it’s important to maintain a healthy balance between the two.
In reply to Frederic Juglaret:
Frederic, there is certainly a terminology problem in the field of performance measurement. Many people (across the world) use several different words or terms that essentially mean the same thing: measure, metric, indicator, KPI. The last one, KPI, has almost become it’s own new word, even though it’s an acronym for Key Performance Indicator.
I think the terminology debate is futile at this point in time. There have been many debates online about what is the correct terminology to use, but I find it easier just to ask people what they mean when they use a particular term.
Here’s more about this: http://kpilibrary.com/experts/measure-what-matters/topics/what-does-kpi-really-mean
In reply to lisa ridley:
Good points Lisa. I would suggest that if your strategy is well designed and cascaded, and like point 1 in the articles says, your measures are aligned to strategy, you will naturally have lead-lag relationships among your measures.
Your second point about getting more balance in your measures, so the P&L/Cash ones don’t dominate, I think also should be taken care of if you have a well designed strategy that doesn’t focus too heavily on the financials.
Thanks Stacey for the inputs.
I would suggest if you can give some real time example and co-relate it with your checklist. It will help the readers at great extent to understand the applied of your KPI checklist.
for example take any role like Manager Operation or Manager Maintenance or Manager Customer Care and then try to explain this check list in context to the above selected role.
Thanks in advance.