KPIs: The Good, The Bad, The Ugly
The concept of KPIs is critical to the welfare, growth and profitability of any company. Well-planned and well maintained KPIs help keep a pulse on the health of a company. Unfortunately, poorly executed KPIs become an active component in the destruction of many companies.
Here is a list that highlights a few things that make KPIs good, bad, or ugly.
The Good
Here are some things that make KPIs good:
Pertinent KPIs: Too many companies buy an “off the shelf” KPI tool that may have been slightly customized for their industry. Good KPIs grow organically and are cultivated by people who understand the DNA of their company, their industry, and of the world their company exists in.
Three Dimensional KPIs: Linear thinking is good for creating straight lines but terrible for KPIs. Companies exist in a 3D world and, therefore, need 3D KPIs. For example, a call centre measuring “call length” is an example of linear thinking. A support call has duration and content. It has a “fix the problem” component and a “fix the customer” component. Good KPIs will capture the 3D world of a support call into a group of opposing yet complementary metrics.
Living KPIs: Companies grow and morph. Society changes. Economies ebb and flow. Good KPIs are influenced by these organic influences. They adjust to the life pulse of the company and its surrounding environment. Historic and current KPI records are documented alongside the organic influences that shaped them and their data.
The Bad
Here are some features of bad KPIs:
Green dashboards: KPI dashboards that are all green often indicate one or more of the following:
They aren’t measuring anything. They are like a car gas gauge stuck at “Full”. Nobody can tell what is really happening.
The company is in a coma. If teams are growing, products are improving, and energy is being expended, there will be legitimate “yellow” and “red” statuses mixed with the green. If everything is green, either everybody is too scared to do anything new, or. . .
Somebody is lying. I have been asked to “update” my data feeding a dashboard “because the dashboard is yellow / red”. My data was accurate, but a green dashboard was more important to that person than accurate data. Maybe they were scared of executives in love with green dashboards. . .
Static / Rigid KPIs: Somebody hired a consultant to create a dashboard. Unfortunately, nobody understands the data that feeds the dashboard. Therefore, nobody updates the data points that feed the dashboard. Slowly at first, then with increasing speed, the dashboard becomes increasingly meaningless.
Thinking KPIs can measure everything: KPIs can be an effective tool, but they are an irrational tyrant when used in isolation. KPIs must be kept in context with a larger set of data that cannot be measured on KPI dashboards. This larger data source must inform and modify KPIs to keep them current and pertinent.
The Ugly
It is hard to split “The Bad” from “The Ugly”. In many ways, The Ugly is just The Bad gone worse.
Performance reviews based only on KPIs: A person will always perform against what you measure them by. If a call centre rep’s performance is based on length of call, they will have short calls (what is measured) with little to no thought on the content or context of the call (what isn’t measured). Performance reviews need to review the capabilities, experience, persona, and performance of the employee. The information from the review needs to inform the KPI – not the other way around.
Executive decisions based on KPIs: This speaks of lazy uninformed executive decisions. Too many managers feel that their KPI dashboard provides them all the information they need to make staffing, strategic, and budget decisions. I am so glad these people don’t fly airplanes! KPIs are only data points input into the decision process. Like airline pilots, managers and executives must be deeply knowledgeable of the airplane / business they are “flying” and make decisions based on that knowledge and informed by various data sources, including KPIs.
Ignoring KPIs: The opposite of infatuation with KPIs can be a “no KPI” environment. This is analogous to flying an airplane in a cloud without any instruments to guide you. If that doesn’t scare you, talk to a pilot – it should terrify you. Companies that do not measure anything have no data points to chart their progress or health. Success may blindside them like a lottery win. More likely, failure will be their constant companion – just like their losing lottery tickets.
Now that we have opened this topic, in my next blog post, I will provide a working definition of a KPI and an analogy to help create effective KPIs.