Why most KPIs don't work and what to do about this

By Aleksey Savkin Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm

Why most KPIs don't work

There are many companies where KPIs are treated as a "necessary evil," one of the reasons is a poor implementation and translation of KPIs to employees.

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We need a sound approach for KPIs that will:

Help managers to use KPIs for business management, not just for measurement; Ensure that line-level employees buy-into KPIs as a business tool.

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The business context of any KPI is formed by:

Business Objectives Action Plans Team

Let's have a look at these parts and see how they might help us to convert a KPI from a measurement tool that employees disparage to a management tool that employees will buy into.

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Alignment with business objectives

Each KPI should be aligned with a specific business objective. According to the practical usage, there are two functions that typically are associated with a KPI:

Monitoring of the performance Measuring of the progress

Example: KPI: Number of leads per month -> Function: measuring the progress -> Business objective: Ensure the growth of the number of deals closed by 30% during the next 6 months.
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Action Plan

In a case of monitoring of the business performance a business objective might be to ensure that its KPI is in the green zone and react appropriately when it goes in the red. When a business objective is focused on achieving something, a KPI will measure the progress towards the goal. An action plan in this case includes all the steps necessary to achieve a specified objective.

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Team

Translate a KPI to your team by explaining to employees a why aspect, e.g. how a KPI is aligned with a specific business objective, how that business objective helps to execute a companys strategy. Avoid using reward KPIs or linking any type of compensation to a KPI. Check out this article for details and best practices. Cultivate in your company a tolerant culture that will treat red-zone KPIs as opportunities. Check out the article by Sandy Richardson that explains the details. Assign a responsible employee for a specific KPI. The person should be responsible not just for filling in data each month, but for ensuring that an action plan is executed. Involve your team in KPI design.

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Automation software

MS Excel for small companies when no strategy map is designed and there is only a single scorecard BSC Designer when it is necessary to create a strategy map where business objectives are linked by cause-and-effect connections and it is necessary to visualize important data about objectives and KPIs. Learn more http://www.bscdesigner.com

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A sound approach for better KPIs

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Start KPI design with a business context, not with a KPI. Define what your business objective is.

Do you have an action plan? What are you going to do to achieve a specified business objective?

Define a KPI; it can be a KPI for monitoring of the performance or for the tracking of the progress.

Translate your KPI to a team. Explain the context, avoid reward KPIs. Involve your team in KPI design.

Choose a proper KPI automation and visualization tool.

Based on http://www.bscdesigner.com/sound-approach-for-kpis.htm