Three Steps to Increase KPI Effectivess
Is any KPI (key performance indicator) better than no KPI?
In short, no.
A favorite phrase of a former CEO leader of mine was “what gets measured gets done”. In my experience, forcing accountability through reporting out on progress does increase the likelihood that specific work gets done. However, whether that work advances the mission, improves the bottom line, or otherwise positively effects the organization isn’t always guaranteed.
When employees start optimizing for what is measured rather than what matters, the following risks arise:
Metric manipulation: workers focus on the numbers being tracked while ignoring the bigger impact, quality, and effectiveness of their work. At one of my prior jobs, I had to invite 50 people to hear my pitch per day. I never fell short of hitting that metric, but I certainly sacrificed quality for quantity sometimes.
Siloed work: collaboration can drop if employees are all focused on achieving their own metrics rather than spending time on less quantifiable tasks such as mentoring, knowledge sharing, and long-term culture building. Resource and knowledge guarding aren’t just things that our pets do, unfortunately—individuals who are job insecure or who are struggling to hit their metrics can also fall into this trap.
Unethical behavior: I have never been at an organization where we want to admit that this happens, but when individuals’ pay, advancement, or job success depends on specific metrics, corners have been cut and data has fudged.
Stifled innovation: when individuals are primarily judged on a narrow set of outcomes, employees avoid risks that might fail in the short term.
So, how do we design metrics that work? Following are three steps to increase the chance that your KPIs move the needle:
Focus on stakeholder outcomes: avoid measuring activity or inputs—measure the actual impact you want to achieve. And, structure KPIs around key stakeholder (ie: customers, employees, regulators, etc.) outcomes that will drive your business forward.
Design measureable goals: goals should be SMART (specific, measureable, achievable, relevant, and time-bound). Everyone pursuing a metric should know what “success” looks like, where they currently stand, and how to track their progress.
Build buy-in and accountability: I have met many executives who think that their team members should both be mind readers and intrinsically motivated regardless of their work culture, compensation level, and fit for the job. At the end of the day, employees perform the best when they understand the purpose of KPIs, have a hand in building them, see the impact hitting those KPIs have on the overall business, and have the opportunity to provide regular updates on their progress.
In other words, quality KPIs save time and resources, increase transparency, decrease distrust and bad behavior, and increase time for meaningful and productive activity.
