A KPI cheat sheet
One of the ways to anchor continuous improvement is to work with KPIs in the workplace. When introducing this concept at a client’s organization, one of their team members asked if there was a convenient overview of the key principles around KPIs (key performance indicators). She wanted a cheat sheet! I’ve written a couple of key KPI tips & tricks below. There are more, of course, so if you think I’ve missed something, feel free to leave your comments below.
Everything starts with the strategy
A participant in our Lean training told me that it was difficult for his organization to carry out brand value, customer engagement, and a few other indicators because they felt that these indicators did not actually apply in their situation. I asked him why they wanted to implement those indicators. He said that they had found those indicators in the literature. They had no strategy or objectives in any form, but, for some reason, they thought they had a measurement problem.
KPIs that you find in the literature are not always relevant for your own organizational strategy. If you have not developed your strategy yet or if you’re not yet clear on what you actually want to achieve, it is too early for KPIs.
KPI development is a process
Years ago, I facilitated developing KPIs for the first time. I was standing in front of a blank flip chart and I asked my client to brainstorm about possible KPIs. I was a novice consultant and my colleague, the project manager, had just left the room to answer an urgent phone call.
Although I had a basic understanding of what good KPIs were about, I got no further with helping my client than naming project milestones (“the web design will be complete in August”), improvement initiatives (“we have to redesign the CRM process“) or vague ideals (“customer loyalty”). What I did not realize is that you can use a lean approach when developing KPIs. This process is based on the results you want to achieve with the strategy, so you filter out all the superfluous information and reach less = more knowledge. Just as in any other process, when developing KPIs you need the experience and discipline that are vital to continuously improve the process.
Read more about KPI requirements and Key Performance Indicators:
Agreement on the strategy is often an illusion
When organizations develop their strategies they have a habit of writing down that strategy in ambiguous and abstract ideals. And if you plan to convert strategy into indicators, it is essential to write down that strategy in plain language. Language that deals with sight, hearing, taste, touch, or smell. An ambiguously written strategic objective, such as improving customer experience, can be translated into faster payment processing or fresh and clean hospital facilities.
I’ve seen teams working on strategies switch from 100% agreement on vague ideas to opposing ideas about possible desired results. This means that their agreement on the strategy was actually an illusion. To describe the results you want to achieve, use a language that an 8th grade student could understand. If you do your best together to get specific results in that way, you will then easily come up with clear KPIs.
It’s not about the Dashboard
Dashboard software like Board or Qlik is excellent when used to support a well-developed strategic and operational management system. However, in many cases, there’s more interest in advanced business intelligence tools than knowing what’s behind the process. KPIs are not about the management dashboard at all. KPIs serve to get a clear picture of what you’re trying to achieve and monitor progress towards the goal. A dashboard is the supporting instrument; too strong an emphasis on technology leads to distraction.
It’s not about the KPIs
In terms of distractions, we notice a lot of clients who think that the process starts and ends with the KPIs themselves. Unfortunately, they are often only concerned about complying with reporting requirements. Or preparing for an important meeting. Such an approach completely ignores the power of the KPI development. Namely, the fact that KPIs provide decision-making insight and allow for continuous improvement on a daily basis.
Written by drs. Louis Brackel RC