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The Three Rules that Make KPIs Work

We work with many companies that are going through an exciting, if somewhat stressful, period of transformation and growth. Often they have identified Key Performance Indicators as a crucial part of how they want to manage this change, and they always have the best of intentions. They want people to know how their work contributes to the company, and they intend to situate things so people can succeed often and contribute more.

You may be seeking to implement a KPI structure to create a performance oriented culture in your business. Your chances of success go up if some of the ‘cultural’ aspects are discussed in advance.

For a KPI structure to work, it’s best when leadership acknowledges that their own behavior and reactions may need to change slightly. First, KPIs require a certain level of transparency which might mean that new information and data will be shared with the employee. That means leadership needs to be prepared to be vulnerable and open to visibility around their own performance. A KPI won’t always go the way you want it to, and when it goes the wrong way, it’s better to think about it together than it is to try to hide it.

When management can do this, then it’s not so scary for the employee to do it, too. It creates an environment where it is safe to accept when things are not on track – as long as the responsible parties take ownership of the tasks and projects which they must undertake to improve performance going forward.

These cultural transformations affect much more than employee performance. In many ways, they change the corporate culture by adding openness and visibility around the metrics that matter. Today’s workforce really wants and needs this sort of environment to thrive and succeed at work.

For that reason, it’s very important that the KPIs you track are good ones that really do serve their purpose. I always know that a business will have a strong KPI structure when we do these three things:

  1. Pose good questions
  2. Drive robust discussions
  3. Demand affirmative action

Here’s why:

1. Pose Good Questions

One of the aspects of implementing KPI structures that we help businesses with most is simplification. In the days of big data, there are often so many options for metrics that we might call ‘KPIs,’ it is easy to get carried away. We know that the more we ‘focus,’ the more blurred our focus can get.

So of all the things you’d like to measure, it is important to identify the ones which are going to really make your team think. Paul Shrimpling says that we can only obsess about a few metrics – three, at the most, to be precise.

I agree with this and know that your chances of obsessing over something are directly related to the questions it asks. Within each functional area and role, there will be certain areas where the greatest opportunities for improvement lie. When you look at your KPIs, you want to be thinking, ‘What’s changed?, What did we prioritise last week, and what impact did it have?’ You want the number to help you answer questions, too: ‘What is really going on here? What is the best thing I (we) can do to move this number forward this week?’

You’ll know you’ve picked a good KPI when you become increasingly inquisitive and the answers to your questions become increasingly action oriented.

Which brings us to point two.

2. Drive robust discussions

This is where the rubber meets the road. It is no good asking questions if you aren’t prepared to scratch below the surface and really get into the issues. You’ve got to be open to strong debate to really get the best answers – and that can be tough, but it is invigorating and exciting.

Great KPIs smoke out the issues, and they give them nowhere to hide. Working with colleagues to truly understand what influences a KPI is one of the most exciting things about work. Managers need to be ready for quite a range of possible answers.

Are motivational or time management factors driving activity? How are we making decisions on what to say ‘No’ to? Is there a way to drive effectiveness by identifying opportunities for changing processes? Or do we need upskilling through training?

Robust discussion about performance is never easy because our natural reaction is to be defensive. But with the proper attitude about transparency and working together, these can be the most exciting times.

I’m most invigorated when my client is taking the issues head on, collaboratively. When employees see themselves as part of the team that’s making a difference, it has a massive impact on employee engagement and drives real, long-term results for the business.

Here’s why:

3. Demand affirmative action

What actions do your KPIs demand? Answering this question is just as important as asking the right ones up front. Once you’ve agreed on the metric that matters most, why then, what is it you’re to do if the metric moves in the wrong direction.

Your culture has already changed for the better. The employee knows that the KPI is fundamental to their role and their department. They understand it will help measure their contribution to the organisation and to the company’s strategy. And since they have been given both accountability for the KPI and the authority to take the actions necessary to deliver, what might those actions be?

At this point, sometimes the democratic and transparent nature of this whole interaction needs to be set aside momentarily so managers can bring their experience and expectations to bear. We’ve asked challenging questions of ourselves, we’ve debated causes, and we’ve discussed solutions. Often there needs to be direction or boundaries around action.

What if the best thing to do is to ‘eat the frog’ – for the employee to start their day with the least palatable, but most important, task? Sometimes it is scheduling some formal or informal training to hone their skills or to master procedures used in the organisation. Whatever it may be, one thing is always true: when people are clear as to why a decision is made, and when their thoughts have been taken into account, their commitment to the KPI and to the range of action allowed to move it are far more certain.

In summary, operating a KPI structure that will really make a difference to your people and your business can be challenging. But your A-players want to have these challenging conversations. They want to smoke out and meet the issues. They want to demonstrate that they can get results.

So make sure your team will be passionate about your KPIs.