DO YOUR KPI’S HELP YOU EXECUTE AND INNOVATE ?
Hitting the target but missing the point ! Are your KPI’s relevant ?
Key Performance Indicators” (KPI’s) is a universally understood term in business but commonly underutilized. KPI’s are a tool that can help align your employees & business units to the planned strategy. Alas, the tool is only as good as the craftsman. A global survey by “Advanced Performance Institute” indicates that 38% of CXO level respondents felt that a common vision of performance management does not exist in their companies. Another survey by API indicated that only 15% of respondents from 1100 organizations believed that all of their performance indicators were linked to the strategy of the organization.
As an example, let’s say that the objective of an organization ‘X’, which is a telecom service provider is to improve customer satisfaction. Let’s assume that the customer service department tracks a KPI: “Customer calls handled per day”. A troubled customer calls up and is put on hold for a minute and is routed myriads of options before reaching a ‘human’ help desk executive who is unable to understand the customer’s issue or help him. The customer hangs up frustrated.
Is the customer serviced? Definitely not. Is the department’s KPI met? Well, the call was handled, technically speaking. Will it lead to higher customer satisfaction a.k.a organizational objective? Definitely not. So a measure of 10000 calls managed in a month would actually mean nothing for the organization which is striving for higher customer satisfaction.
a. What could be better measures of customer satisfaction? Customer Feedback of course; customer churn b. What are the measures that lead to higher customer satisfaction ? Traditional measures of goal achievement (or success) need to be there . [e.g. customer issues resolved Rate, Resolution time etc.] However measures indicating points of failure are critical. [ # of customer issues unresolved (absolute and percent), Points of service failure, Measures of Process inefficiency (Mean Time to Resolve Critical Errors) etc.] KPI’s indicating failure are powerful and revealing.
The example is simplistic, but it illustrates the point that even if organizations track a bunch of performance metrics, they may actually be totally irrelevant to their larger objectives. It is important for business managers to figure out, in the context of the organizational goals, what are the KPI’s revealing and what is it that they are hiding. Essentially you may be hitting your targets, but completely missing the point.
It is well understood that global product development processes are essentially complex and only organizations which innovate their way through the maze of competitors, consumers and market dynamics remain sustainable. One of the ways organizations can force themselves to innovate in line with its strategic objectives is by evolving KPI’s which are truly relevant for business growth and sustainability. The 30,000 feet business algorithm to evolve and innovate using KPI’s is:
- Break down organizational strategy metrics down to relevant related metrics for each org function (Engineering and R&D, Sales, HR, etc.)
- Break down each functional unit KPI into corresponding set of metrics for each of the sub-functions. The metric set should include a mix of historic and forward looking KPI’s. It should also include metrics that indicate points of success and points of failure.
- Define action plan and target for each metric
- Define dashboards to mirror execution.
- Establish periodic governance to re-define action plan based on achievement of forward looking metrics.
- Identify gaps and innovate across your products, process, technology and business model
- Do a re-check on strategy
- Goto Step 1
It is not that decision makers and executives aren’t aware of these. Organizations large and small get so caught up in the regular operational challenges that sometimes they miss out on the bigger picture and fail to align its people to its common purpose. Is your organization KPI driven and has it helped you innovate and succeed ?