Tips to create winning KPIs
Both creators of balanced scorecard and specialists in this area keep saying that just purchase of relevant software and a few dollars invested in implementation of balanced scorecard will never give you visible results. Moreover, lack of investments, human resources and numerous mistakes made at each stage of balanced scorecard implementation make this great performance evaluation tool just a pile of useless datasheets, graphs, strategy maps etc.
As already said above, mistakes that each implementation level can have serious consequences for the final results. But perhaps, selection or search for the right measures or KPIs is the most important stage. If you want to make balanced scorecard fail, just choose the set of the wrong and irrelevant KPIs. Negative results are guaranteed!
So, the question “how to find the right measures?” is the most popular and frequently asked question which at the same time has no definite and universal answer. Everything depends on the business area, management structure of the company, strategic goals, investment and human resources etc.
However, there are some general guidelines and tips to be used when making a choice of the right KPIs. Strange as it may seem, but as a rule winning KPIs and measures evaluate things to which we usually pay less attention. Indeed, it is very difficult to design KPIs which will measure such things as employee loyalty or organization climate. We are not trying to say that selection of winning KPIs is impossible, but rather attempt to underscore the importance of this process and the amount of responsibility involved.
So, let’s review five basic tips/steps to be taken into account when designing winning measures/KPIs.
Stages of selecting KPIs/measures
Picture yourself final results
Like in everything we do in our life, it is important to keep in mind performance outcome when making a choice of performance measures. It is extremely important to decide which results/outcomes need to be tracked and analyzed. As soon as you come up with the KPIs, write down the expected outcome. Answer questions “why do I want to evaluate this measure?” and “what changes do I want to see and why?” In other words, you need to know your goals and what makes it possible to achieve them. Without this awareness the set of KPIs will be just a bunch of poorly interrelated indicators.
Use simple “sensory” language
So, you have set goals and pictured yourself final outcome in your mind. Now is the time to describe the outcome in detail. It is at this stage that you need to use words you often use when you describe what you feel, see, hear, smell, taste or do. Of just imagine that you have reached final results. What words would you use to describe your feelings and thoughts? It is highly recommended that you avoid those emotionless and colorless words as effective, efficient, strategic, reliable. You do use these words in formulating your goals, don’t you? Well, keep it down to earth.
Think globally/draw a bigger picture
Of course, you have to focus on the most important things. However, always picture yourself the bigger picture. Analyze alternative options, forecast possible consequences of measurement. Do not be afraid to picture negative consequences. Picture yourself your possible behavior and response actions. In other words, be ready for any developments.
Think about the evidence
OK, you have selected KPIs using sensory language, imagined a bigger picture…what’s next? How will you learn that your goals are achieved? What will let you know about positive or negative outcomes? If your goals are not achieved then to what extent are they reached? You need to try to keep balance between objective measures and KPIs which you physically can measure. You may create a seemingly winning KPI but its evaluation will never give you any signs, alerts and knowledge.
Give measures their names
Do not be too creative here. Measures names should exactly demonstrate what these measures are evaluating. Remember that you will have to deal with the dozen or even more measures. Do you want to consult the glossary or KPI description any time you are having a look at it? KPIs and their measurement is used in strategic decision making where you don’t have time to “translate” KPIs and their definitions. Keep it simple.
Finally it should be noted again that there is no universal procedure to select KPIs. As already said above, it depends on many factors, both internal and external. But using these tips, it will be much easier to create a set of winning KPIs which will lead your company to strategic goals.
Use these tips when selecting and designing KPIs/measures
