Set KPIs to Improve Performance
The purpose of having metrics is to improve the performance and behaviors of people throughout an organization. But too often, they’re chosen and applied without much thought—making them not only ineffective, but potentially harmful.
Developing effective metrics takes strategic insight into where the organization wants to go.
“Alignment is a critical step,” says licensed engineer Joshua Plenert, author of Strategic Excellence in the Architecture, Engineering, and Construction Industries: How AEC Firms Can Develop and Execute Strategy Using Lean Six Sigma. “Process starts with a purpose.”
In other words, anything that does not help drive the organization’s strategy should get the boot.
Here are some tips for developing effective metrics and creating buy-in:
- Select the metrics team. The goal is to include a wide range of perspectives, so include at least one executive and at least one manager from each functional unit of the organization, but consider including many others. Sometimes, the most valuable perspectives will come from staff members who deal directly with the problems daily.
This team should also include people who have a positive rapport with—or influence on—their respective units. Team members should have some level of interest in the process and should feel under no obligation. They are not only there to develop the metrics, but also to promote them and help solicit input from all members of their units.
- Focus on strategic objectives. Every single metric should clearly and directly support one or more strategic objectives. Start listing every metric suggested, remembering to list KBIs (Key Behavioral Indicators) to go along with your KPIs (Key Performance Indicators). • Reduce the list. Either eliminate some suggested metrics entirely or combine several into one. Good metrics should be feasible, controllable, logical, specific, and clear to avoid an unnecessary data collection burden.
- Fully define metrics. Once the team has edited the list, give every metric a memorable name and decide who will take charge of each one. Use simple and direct language to describe how it aligns with a strategic objective. Include a brief description of the expected outcome(s) and how the firm intends to use the metric.
Fully-Defined Metric Checklist
|Name||Make it meaningful|
|Captain||The person in charge of this metric|
|Description||Full describe the metric in a clear and precise manner|
|Calculation||Show the calculation associated with the metric|
|Strategic Allignment||Explain (in detail) how this metric will support the corporate strategic plan|
|Intended Result||Describe the intended result of using this metric|
|Usage||Clearly explain how the firm will use the data resulting from this metric|
- Test for longevity. Metrics should also include an innovative vision of the future. They should focus on taking innovative leaps past the competition rather than simply trying to play catch-up.
- Solicit feedback. Allow time for all members of the organization to review the metrics and put in their two cents—not by obligation but by invitation. “A lot of times they have really good insight,” says Plenert, adding that giving feedback also helps engage them by offering a sense of ownership from the beginning.
Then carefully consider suggestions and redefine metrics as appropriate.