Why most KPIs don't work and what to do about this

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How to ensure that line-level employees buy-into KPIs and don't treat them as a "necessary evil." Use KPIs for business management, not just for measurement.

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Why most KPIs don't work and what to do about this

  1. 1. Why most KPIs don't work and what to do about this By Aleksey Savkin Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  2. 2. Why most KPIs don't work  There are many companies where KPIs are treated as a "necessary evil." Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  3. 3. Why most KPIs don't work  There are many companies where KPIs are treated as a "necessary evil."  One of the reasons is a poor implementation and translation of KPIs to employees. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  4. 4. We need a sound approach for KPIs that will:  Help managers to use KPIs for business management, not just for measurement; Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  5. 5. We need a sound approach for KPIs that will:  Help managers to use KPIs for business management, not just for measurement;  Ensure that line-level employees buy-into KPIs as a business tool. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  6. 6. The business context of any KPI is formed by:  Business Objectives Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  7. 7. The business context of any KPI is formed by:  Business Objectives  Action Plans Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  8. 8. The business context of any KPI is formed by:  Business Objectives  Action Plans  Team Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  9. 9. The business context of any KPI is formed by:  Business Objectives  Action Plans  Team Let's have a look at these parts and see how they might help us to convert a KPI from a measurement tool that employees disparage to a management tool that employees will buy into. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  10. 10. Alignment with business objectives  Each KPI should be aligned with a specific business objective. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  11. 11. Alignment with business objectives  Each KPI should be aligned with a specific business objective. According to the practical usage, there are two functions that typically are associated with a KPI:  Monitoring of the performance Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  12. 12. Alignment with business objectives  Each KPI should be aligned with a specific business objective. According to the practical usage, there are two functions that typically are associated with a KPI:  Monitoring of the performance  Measuring of the progress Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  13. 13. Alignment with business objectives Example: KPI:“Number of leads per month” -> Function: measuring the progress -> Business objective: Ensure the growth of the number of deals closed by 30% during the next 6 months. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  14. 14. Action Plan  In a case of monitoring of the business performance a business objective might be to ensure that its KPI is in the green zone and react appropriately when it goes in the red. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  15. 15. Action Plan  In a case of monitoring of the business performance a business objective might be to ensure that its KPI is in the green zone and react appropriately when it goes in the red.  When a business objective is focused on achieving something, a KPI will measure the progress towards the goal.An action plan in this case includes all the steps necessary to achieve a specified objective. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  16. 16. Team  Translate a KPI to your team by explaining to employees a “why” aspect, e.g. how a KPI is aligned with a specific business objective, how that business objective helps to execute a company’s strategy. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  17. 17. Team  Translate a KPI to your team by explaining to employees a “why” aspect, e.g. how a KPI is aligned with a specific business objective, how that business objective helps to execute a company’s strategy.  Avoid using reward KPIs or linking any type of compensation to a KPI. Check out this article for details and best practices. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  18. 18. Team  Translate a KPI to your team by explaining to employees a “why” aspect, e.g. how a KPI is aligned with a specific business objective, how that business objective helps to execute a company’s strategy.  Avoid using reward KPIs or linking any type of compensation to a KPI. Check out this article for details and best practices.  Cultivate in your company a tolerant culture that will treat red-zone KPIs as opportunities. Check out the article by Sandy Richardson that explains the details. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  19. 19. Team  Translate a KPI to your team by explaining to employees a “why” aspect, e.g. how a KPI is aligned with a specific business objective, how that business objective helps to execute a company’s strategy.  Avoid using reward KPIs or linking any type of compensation to a KPI. Check out this article for details and best practices.  Cultivate in your company a tolerant culture that will treat red- zone KPIs as opportunities. Check out the article by Sandy Richardson that explains the details.  Assign a responsible employee for a specific KPI.The person should be responsible not just for filling in data each month, but for ensuring that an action plan is executed. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  20. 20. Team  Translate a KPI to your team by explaining to employees a “why” aspect, e.g. how a KPI is aligned with a specific business objective, how that business objective helps to execute a company’s strategy.  Avoid using reward KPIs or linking any type of compensation to a KPI. Check out this article for details and best practices.  Cultivate in your company a tolerant culture that will treat red-zone KPIs as opportunities. Check out the article by Sandy Richardson that explains the details.  Assign a responsible employee for a specific KPI.The person should be responsible not just for filling in data each month, but for ensuring that an action plan is executed.  Involve your team in KPI design. Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  21. 21. Automation software  MS Excel for small companies when no strategy map is designed and there is only a single scorecard Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  22. 22. Automation software  MS Excel for small companies when no strategy map is designed and there is only a single scorecard  BSC Designer when it is necessary to create a strategy map where business objectives are linked by cause-and- effect connections and it is necessary to visualize important data about objectives and KPIs. Learn more http://www.bscdesigner.com Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  23. 23. A sound approach for better KPIs Start KPI design with a business context, not with a KPI. Define what your business objective is.1 Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  24. 24. A sound approach for better KPIs Start KPI design with a business context, not with a KPI. Define what your business objective is.1 Do you have an action plan? What are you going to do to achieve a specified business objective?2 Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  25. 25. A sound approach for better KPIs Start KPI design with a business context, not with a KPI. Define what your business objective is.1 Do you have an action plan? What are you going to do to achieve a specified business objective?2 Define a KPI; it can be a KPI for monitoring of the performance or for the tracking of the progress.3 Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  26. 26. A sound approach for better KPIs Start KPI design with a business context, not with a KPI. Define what your business objective is.1 Do you have an action plan? What are you going to do to achieve a specified business objective?2 Define a KPI; it can be a KPI for monitoring of the performance or for the tracking of the progress.3 Translate your KPI to a team. Explain the context, avoid reward KPIs. Involve your team in KPI design.4 Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm
  27. 27. A sound approach for better KPIs Start KPI design with a business context, not with a KPI. Define what your business objective is.1 Do you have an action plan? What are you going to do to achieve a specified business objective?2 Define a KPI; it can be a KPI for monitoring of the performance or for the tracking of the progress.3 Translate your KPI to a team. Explain the context, avoid reward KPIs. Involve your team in KPI design.4 Choose a proper KPI automation and visualization tool. 5 Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm

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