Growth Tips
The benefits of Key Performance Indicators
07-Oct-2010
Most companies try to set clear numerical targets (goals). However, they
seldom do a good job of measuring progress toward them.
Unfortunately, very few companies are good at setting and tracking Key
Performance Indicators (KPI’s) - the small handful of predictive
measures that will ultimately drive goal achievement. Nor do they do a
good job of holding people accountable for their achievement.
The book "Transforming Performance Measurement" describes the benefits of Key Performance Indicators:
Directs people’s behavior.
Most employees operate on the following assumption: “Tell me how you measure me, and I will tell you how I will behave.”
Makes performance visible.
You can only manage what you measure. Keeping the scores visible where
everyone can see them, shows you how well the various parts of the
business are working, and who is performing and who is not.
Focuses attention.
What gets measured gets done. Employees are faced with many competing
demands on their time and resources. When they know the 1 or 2 numbers
that their performance will be measured on, it keeps them focused on
doing the right things – particularly when it is linked to reward /
consequence systems.
Clarifies expectations.
Prioritizing a small handful of Numerical Targets (goals) and Key
Performance Indicators (KPI’s) enables managers to communicate their
expectations to employees in a clear and unambiguous manner.
Provides objectivity.
Data enables you to “manage by fact.” Evaluating employee performance
is not about whether people are working hard or being busy. What did
they actually achieve?
Improves execution.
Larry Bossidy, co-author of the book "Execution" remarked, “When I see
companies that don’t execute, the chances are that they don’t measure.”
See: Execution is STILL the major challenge for business leaders.
Promotes consistency.
Activities and outcomes that are not measured properly - tend to be
fluctuate – with negative implications for the quality of your results.
Clear feedback.
Holding people accountable
for achieving their target level of performance every week / month is
vital to ensure the company (and individual) is on the right track.
Improves decision-making.
One of the major causes of failure in decision-making is poor use of
data. One accurate measure can be worth a thousand opinions.
Promotes understanding.
Quality guru W. Edwards Deming said that systematic process measurement
led to the “profound knowledge” that was essential to top quality
outcomes.
One final tip:
KPI’s should be graphed to show trends and the scores color-coded so they can be easily understood at a glance:
Green = Good. Exceeds target level of performance. Praise and recognize the person accountable.
Yellow = OK. Minimum acceptable threshold. Get an explanation and keep a close eye on.
Red = Bad. Unacceptable performance. Urgent attention required.
Business Execution Software makes this easy!
