What I Learned About KPIs from My Six-Year-Old

What I Learned About KPIs from My Six-Year-Old

I arrived to pick up my daughter on the last day of art camp just in time for program evaluations. Since we at the Balanced Scorecard Institute (BSI) use evaluation data for course improvement, I was intrigued to watch a room full of six- to nine-year-olds randomly fill in bubbles and then quickly improve their scores when the teacher noted that if any of the scores were less than three they’d have to write an explanation. 

In the car on the way home, I asked my daughter why she rated the beautiful facilities only a 3 out of 5. She said, “well, it didn’t look like a porta-potty. And it didn’t look like a palace.” She also said she scored the snack low because she didn’t like the fish crackers and wished they’d had more pretzels. As I giggled at the thought of some poor City program planner or instructional designer trying to make course redesign decisions based on the data, I reflected on the basic principles that we try to follow that would have helped the city avoid some of the mistakes they had made.

The first is to know your customer. Obviously, giving small children a subjective course evaluation standardized for adults was ill advised. Better would have been to ask the students about their experience using their language: did they have fun? Which activities were their favorite? Which did they not like as much?

Further, the children aren’t really the customer in this scenario. Since it is the parents that are selecting (and paying for) the after-school education for their children, their perspective should have been the focus of the survey. Were they satisfied with the course curriculum? The price? The scheduling? Would they recommend the course to others?

Another important principle is to make sure that your measures provide objective evidence of improvement of a desired performance result. My daughter’s teacher used descriptive scenarios (porta-potty versus palace) to help the young children understand the scoring scale, but those descriptions heavily influenced the results. Plus a child’s focus on pretzels versus crackers misses the mark in terms of the likely desired performance result.

Similarly, it is important not to get fooled by false precision. Between some participants superficially filling in bubbles and others changing their answers because they don’t want to do any extra work, the city is simply not collecting data that is verifiable enough to be meaningful.

These might seem like a silly mistakes, but they are common problems. We have had education clients that wanted to measure the satisfaction of a key stakeholders (politicians and unions) while ignoring their actual customers (parents and students). We see training departments that measure whether their participants enjoyed the class, but never ask if their companies are seeing any application of the learning. And we see companies making important decisions based on trends they are only imagining due to overly precise metrics and poor analysis practices.

Even the evaluations for BSI certification programs require an explanation for an answer of 3 or less. I wonder how many of our students ever gave us a 4 because they didn’t want to write an answer. I have also seen evaluations go south simply because of someone’s individual food tastes.

At least I can take solace in the fact that no one ever compared our facilities to a porta-potty.

How Did I Get an MBA Without Learning This?

How Did I Get an MBA Without Learning This?

Most MBA programs pride themselves as being the ”practical” degree that will best prepare its students for any number of management roles. And I have to admit that I can point to that degree as a true turning point in my career. But it wasn’t until I became a Balanced Scorecard Professional (BSP) that I learned several principles that I have found to be key to being a good manager and leader.

Help your team articulate a shared vision
Many managers and leaders think that the key to success is to have a clear vision. But vision that is poorly articulated (or not at all) is just a dream. And simply dictating the vision to employees usually doesn’t work either. Change doesn’t happen because “I said so” or by assigning tasks without any context. Employees engage when they understand what we are trying to accomplish and why. Shared vision and change management happen through dialog, facilitation, and the development of a logical business case.

Connect the dots between what employees are working on and desired outcomes
A good supervisor makes sure that employees are completing their tasks. A good leader makes sure that employees are working on and completing tasks that move the organization toward a shared vision of the future. BSPs have been taught to articulate the difference between mission, vision, and strategy. They know how to organize their energy, measurements, and initiatives around a set of coherent strategic objectives. They know that many people are visual learners and so they use a strategy map to communicate how the dots connect. They know how to align department objectives with high level strategy and communicate to employees where they fit.

Measure results (not just actions)
Most managers know to measure project milestones as indicators of success, and unfortunately many strategic planners use this basic principle for KPI development. They define a handful of goals (e.g. Improve Brand Awareness), list all of the projects needed to reach those goals (e.g. website redesign), and then measure the completion of those projects as a measure of success (e.g. percentage of website redesign completed). Good leaders measure results. A redesigned website is nice, but I should be much more interested in whether or not it led to improved brand awareness.

Develop strategy before KPIs
The best KPIs in the world won’t help if they are designed to measure a half-baked strategy. The good news is that you don’t have to be a Steve Jobs-type visionary to develop an intuitive strategy by formally assessing your strategic situation and identifying a path forward using common methods like a SWOT, PESTEL, Customer Value Proposition, Blue Ocean Strategy, and other methods.

There are other such principles, such as how to identify drivers of future performance using Perspectives, how to use strategy to prioritize, how to set and reach reasonable performance targets, and many more. If you can think of any others, please add them in the comments section below.

If you are unsure about what a balanced scorecard or a Balanced Scorecard Professional is, please visit our website.

 

The Ultimate KPI Cheat Sheet

The Ultimate KPI Cheat Sheet

We’ve received a lot of interest in our new KPI Certification Program. In fact, one woman said she couldn’t wait until the first scheduled program offering. She also wanted to know if we had a handy list of the most important principles – she wanted a cheat sheet! So in the interest in tiding her (and others) over, below I have compiled a few of the most important KPI tips and tricks. There are many more of course, so if you think I’ve missed anything, please add them in the comments section below.

Strategy comes first!
A training student told me his organization is struggling to implement measures for brand equity, customer engagement, and a few others because they believed the measures didn’t really apply to their company. I asked him why they were implementing those measures if they didn’t seem to apply, and he said they had found them in a book. They had no strategy or goals of any sort, and yet somehow thought they had a measurement problem.

KPIs found in a book of measures don’t necessarily mean anything in relation to your strategy.  If you don’t have a strategy and/or can’t articulate what you are trying to accomplish, it is too early for KPIs.

KPI Development is a Process
I am embarrassed to admit that the first time I facilitated the development of performance measures with a client, I stood in front of a blank flip chart and asked them to brainstorm potential measures. It was my first consulting engagement as a junior associate and the project lead had stepped out to take an emergency phone call. Even though I had a basic understanding of what good KPIs looked like, I couldn’t help the client come up with anything other than project milestones (“complete the web redesign by August”), improvement initiatives (“we need to redesign the CRM Process”), or vague ideals (“customer loyalty”). What I didn’t understand at the time is that you need to use a deliberate process for developing KPIs, based on the intended results within your strategy. And like any other process, KPI development requires continuous improvement discipline and focus to get better.

Articulate Intended Results Using Concrete, Sensory-Specific Language
Strategy teams have a habit of writing strategy in vague, abstract ideals. As you pivot from strategy to measurement, it is critical that you articulate what this strategy actually looks like using concrete language that you could see, hear, taste, touch or smell. A vaguely written strategic objective like Improve the Customer Experience might get translated into checkout is fast, or facilities are safe and clean. Improve Association Member Engagement might get translated into a result of members volunteer for extracurricular activities. I’ve seen strategy teams shift from 100% agreement on vague ideals to diametric opposition on potential intended results, indicating that their consensus around strategy was actually an illusion.  Use simple language a fifth-grader could understand to describe the result you are seeking. If you spend your time honing this intended result, the most useful performance measures almost jumps out at you.

It’s not about the Dashboard!
Dashboard software is great when it is used to support a well-designed strategic management system. Unfortunately, many people are more interested in buying a flashy new tool than they are in understanding how they are performing (a topic I’ve talked about before). KPIs are not about a dashboard. KPIs are about articulating what you are trying to accomplish and then monitoring your progress towards those goals. A dashboard is the supporting tool and too much emphasis on technology misses and often distracts us from the point.

It’s not about the KPIs!
Speaking of people missing the point, we have many clients who think this process begins and ends with the KPIs themselves. Unfortunately, some of these folks are simply trying to meet a reporting requirement or prepare for a single important meeting. This type of approach completely misses the power of KPI development, which is that KPIs provide evidence to inform strategic decisions and enable continuous improvement.

For more about how to improve KPI development in your organization, see our KPI Professional Certification Program or The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

Identify Strategic Thinking with One Simple Question

Identify Strategic Thinking with One Simple Question

I used to work on a research team for a company that produced an operational risk software product. I always found it interesting how different members of the same team answered an important question: what do you do?

Here is the way Person A and Person B responded:

Person A: We do research on the internet and enter data points into an operational risk database.

Person B: We help banks understand operational risk and how much related capital they were required to reserve by providing an analytical software solution that models operational risk in the global market.

Technically both answers were correct. For the data model to be statistically significant, the product needed a certain number of data points, and our research team’s job was to research and categorize examples of operational loss in order to populate the database and make the model work. And yet, somehow Person A’s answer was always unsatisfying for some people.

It might be tempting to say that Person B was simply exaggerating the importance of their work by describing it in terms of the mission of the product line, but I think that misses an important point about the value of thinking strategically no matter what your position with the organization is. Person A was simply describing our job. Person B was describing how we created value. Different ways of describing our work was actually a window into the strategic thinking style of the team members.

From Daniel Pink to Simon Sinek and others, much has been said and written about how people are more motivated and productive when they understand the larger context for their work. Understanding why they are doing the work is profoundly important for creative professionals to feel a sense of engagement. Helping employees transition from narrowly thinking about what they do to more broadly thinking about what they are trying to accomplish can improve organizational performance in a number of ways.

The good news is that strategic thinking is a teachable skill. In our BSC Certification courses, we begin by teaching the basic semantics of strategy. At first, students mechanically append or replace the “task” language that most are comfortable with (we need to develop a new service by milestone x) with language that reflects a higher level objective (we want to improve the customer experience; the development of a new services is one option for accomplishing that). Over time, mechanical semantics evolve into an instinct for intuitively thinking about the strategic context. As students change the way they think about strategy and action, critical thinking skills improve as well (e.g. if we are trying to improve the customer experience, is a new service really the best way to do it?). The transition for many teams from always focusing on tactics and actions to always starting with the big picture and working down can be quite profound.

For more about how to improve strategic thinking in your organization, see our Balanced Scorecard Certification Program or The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.

4 Reasons Business Intelligence Systems are Like an (Unused) Gym Membership

4 Reasons Business Intelligence Systems are Like an (Unused) Gym Membership

My business intelligence (BI) and analytics software salesman friend said something interesting to me the other day over lunch. He said, “I don’t sell software, I sell gym memberships. When someone joins a gym they are not really buying the membership. They are buying the dream of improved health and a better physique. Their intention is to work out every day and fulfill that dream, despite the fact that few people ever actually follow up. Selling BI software is the same way. I’m not selling the software; I’m selling the dream of improved insight and competitive advantage.” The unspoken implication was that few people ever get significant benefit from their software system, a conclusion I have also observed over my years in strategic performance management. There are many common reasons that your strategic performance management software system might be getting less use than the gym membership you bought last January.  Below are the top 4 that I’ve seen as well as some tips for avoiding them. Reason 1: You bought into the hype but not the skills I overheard a CEO recently saying that he needed to buy into the big data craze.  It was clear that this person had no idea what big data or predictive analytics meant, but he definitely needed to buy some.  Many people seem to think if they just buy some software, within weeks a “number cruncher” will magically come down from a mountain with answers to all of their problems. That is like thinking that if I buy a shovel, a garden will magically appear in my back yard. Performance management and statistical analysis skills are critical to creating value in this field. Reason 2: You keep the results a secret The first question some people ask when considering a performance system is, “how do I keep everyone out of my data?”  Security around private customer, employee, or some financial information is an absolute must, but a surprising amount of strategic organizational performance information can be shared with leaders and managers.  Leaders need information to make decisions and limiting access can communicate that strategy management is something to be left to only a select few.  Analyzing data is only the first step.  The dialog around why the results occurred and what should happen next are just as critical. Reason 3: You only use out-of-the-box performance report design The standard templates provided by the software companies are almost always designed to make the software sell well, as opposed to informing YOUR strategic decision making. Good performance reports communicate three things clearly: 1) How is OUR organization currently performing, 2) Why are WE getting the results that we are getting?  And 3) What are WE doing to improve our results? Reason 4: You count and report on everything that can be counted. Just because the vendor promises that this tool can handle the volume doesn’t mean that this is a good idea. Strategic performance management is about focusing on the most critical things first. I would recommend selecting a handful of critical performance gaps and focus your data collection, analysis, and improvement efforts on those.  Teach everyone in your organization how to do this effectively before you expand to other areas. There are many more common mistakes, but these four are top of mind for me.  Please share other mistakes you’ve seen in the comments section below. For more about how to improve your performance analysis, see the Performance Analysis chapter of The Institute Way: Simplify Strategic Planning and Management with the Balanced Scorecard.
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