Despite recognizing the value of using performance measures (KPIs) as evidence to inform organizational decisions and operationalizing strategy, many organizations still lack an effective methodology for developing meaningful KPIs as evidence and using them to improve organizational performance.
In simple terms, a methodology is a detailed description, set of practices, procedures, and rules to do something. In the case of KPIs, we need a methodology to reliably and repeatably develop meaningful measures of organizational performance.
We use methodologies all the time to standardize activities and develop capabilities. Common examples include:
Strategy: Porter’s Five Forces, BSC, Blue Ocean, Design Thinking, TOC
Business & Process Improvement: PDCA, Lean, Six Sigma, Kaizen
Project Management: Agile, Waterfall, Scrum, Kanban
Change Management: ADKAR, Kotter, Lewin
Marketing: 7Ps, AIDA, AARRR
But many organizations still lack an effective methodology for developing and using KPIs to evidence organizational results.That matters because in lieu of a valid methodology, we tend to rely on brainstorming, benchmarking, or searching KPI libraries. Instead of valid measures and meaningful KPIs those approaches typically yield actions, initiatives, and milestones masquerading as performance measures without providing meaningful evidence of performance against strategy or other priorities.
Requirements of a Valid Performance Measurement Methodology
To effectively and repeatably develop KPIs providing meaningful evidence of results, we need a methodology that is:
Proven: Reliably produces meaningful performance measures
Rational: Based on logical principles about purpose, creation, and use of KPIs
Practical and useable: Easily learned an integrated into daily work
Non-prescriptive: Facilitates creating relevant performance measures
Transparent: Open about its limitations and is continually improved
Above all, we need a methodology that:
Comprehensively addresses KPI development, implementation, reporting, interpretation, and use of KPIs to manage organizational performance.
Includes all the practices, tools, and techniques necessary to replace the poor practices creating the struggles we experience with KPIs.
Performance Measurement Challenges are Common
Based on more than 20 years of global, cross-sector research with over 13,000 data points from hundreds of organizations, we are clear about the top struggles experienced with measuring organizational performance.
People don't understand the real purpose of measuring organizational performance. They see it as ja way to be judged, ranked, or comply with reporting tasks.
Goals are written with vague language making it difficult to understand the desired results, let alone measure them.
Existing measures / KPIs provide little insight into performance against the strategy, desired results, or drivers of those results.
People don't want to be involved. They’ve been burned. They don’t want to be held accountable for things they can’t control.
Existing measures are inconsistent, duplicative, ill-defined and use reliable data.
People can't agree on how to interpret the performance charts They come to different conclusions about current performance ans whether action should be taken.
Performance reports and displays are overwhelming, hard to navigate, and don’t directly relate to organizational priorities. Management doesn’t get actionable insight.
Performance doesn't improve - or doesn't improve enough to justify the effort and resources invested.
A Proper and Sound KPI Methodology Solves the Struggles
A proper KPI methodology has specific steps, tools, and techniques that deliberately addresses each struggle.
A sound KPI methodology will be practical and enable your organization to:
Make performance measurement easy, quick, meaningful, and engaging.
Produce meaningful measures with less effort while fostering ownership, excitement, and pride for improving performance and achieving results that matter.
Adopt Evidence-Based Leadership, Results-Based Management, Strategy Execution, and Continuous Improvement practices that create a high-performance organization and culture.
For a practical and engaging approach to performance measurement, consider the PuMP Performance Measure Blueprint. It's designed to handle all these challenges.
This post was co-authored with Stacey Barr and is an update of a her post from September 26, 2017.
Brook Rolter is the founder of Rolter Associates which provides management, strategy, organization development consulting, and facilitation services to help organizations and managers integrate strategy, performance, and management practices to improve organizational performance. He is the Licensed Partner in the U.S for Stacey Barr, Pty. Ltd PuMP® Performance Measurement Blueprint programs and workshops.
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