Over the years, I have come across more key performance indicators (KPIs) than I can remember. And quite honestly, not all of them were particularly meaningful or valuable.
While this is true, people often end up keeping KPIs that don’t have much value. This is because it’s easy to justify keeping them if that’s just the way things have always been done. Here’s how some people go about doing this:
- Why are we keeping this KPI if it’s not useful?
- We’ve always produced it.
- It’s quite a time-consuming task to update, can we drop it?
- No, the board approved it and we can’t change that.
What Is a KPI?
- The KPI result of another organisation
- The industry average
- The KPI itself from another point in time
Knowing the industry average of something you’re measuring can help raise important questions, for example:
Why has 80% of the team quit their job over the last 3 months? The industry is only showing 4%.
What Is a Meaningful KPI?
How to Define a KPI?
The task of finding the holy grail of KPIs can be intimidating, and you might not know exactly where to start.
John Whitmore proposes a structured way of thinking, which is discussed in The Decision Book. The idea is that a goal should tie back to the ever-so-catchy SMART, PURE, and CLEAR backronyms. Ensuring that your KPI ticks all these 14 boxes will greatly increase your chances of success.
- SMART – Specific, Measurable, Attainable, Realistic, Time-Phased
- PURE – Positively Stated, Understood, Relevant, Ethical
- CLEAR – Challenging, Legal, Environmentally Sound, Agreed, Recorded.
How Many KPIs Do I Need?
Simplicity is the ultimate sophistication
Will Behaviours Be Impacted Positively?
When things get measured, people change. What might only be a number with traffic lights on a CFO’s scorecard can actually represent a real struggle for some areas of the workforce who need to drive that number. Thus, coming up with a KPI can really have an impact on culture and behaviours. Tread lightly.
This is when the Positively Stated, Ethical, and Environmentally Sound aspects of the KPI design become relevant.
If these three criteria are underestimated, the KPI itself may impair an employee’s well-being, as they might perhaps feel controlled, restricted, policed, and under the pressure of constantly being evaluated. This situation becomes a dangerously fertile ground for Goodhart’s Law: ‘When a measure becomes a target, it ceases to be a good measure’.
A KPI must inspire people to control the business problem itself. Meeting the KPI target should not be at the expense of the intended business performance and other areas of the business.
If an IT manager were to implement a metric to track the number of closed service desk tickets as a proxy for business efficiency, they are in fact fostering a culture of quantity over quality, and the more complex tickets might be pending for a long time.
