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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.

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

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.

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

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.

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

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

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.

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

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.

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

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

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

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