Monitoring performance is crucial in maintaining progress and achieving effective control. Reaching the organisational goals is impossible without being able to determine where you are at any point in the journey. The process of establishing and using key performance indicators (KPI’s) is used by many organisations to maintain standards and to act as a platform for positive change. One of the most significant adverse impacts of using KPI’s is the way in which they are designed, implemented and used. There is an expression that goes … “You get what you measure” - and we have all seen examples of this. Typically, the measure itself becomes an obsessive focal point for management and the “bigger picture” of what the business is trying to achieve becomes obscured. In addition, the more pressure applied by management to achieve the KPI’s, the greater the propensity for staff to create situations where the target is achieved at all costs, particularly where rewards or penalties exist in the system.

KPI’s are “what is says on the can”! They are “key” to the business and they indicate performance. Many businesses try to work to a multitude of complex indicators and spend large amounts of time collecting, analysing and presenting the data.

An organisation needs a few key performance indicators. As is often the case, a few simple “rules” can help:-

  1. Try and stick to no more than 5 key indicators.
  2. Make sure that each indicator contributes to the achievement of the overall business objectives.
  3. Ensure that the data for each KPI is easy to collect.
  4. The quicker and simpler it is to collect the data, the more valuable the data is likely to be.
  5. Introduce a formal system to ensure that data is collected, collated, analysed, presented AND acted upon.
  6. Share the performance results with everyone.
  7. Remember that the KPI data represent INDICATORS of performance and in many instances, don’t need to be 100% accurate. Usually data presented in a timely manner that is 90% accurate is much more valuable than data that takes a long time to gather but is 100% accurate.
  8. Finally, remember that the power of indicators is in the insight that they can provide into TRENDS!

Establishing an effective performance measuring process involves the following:-
  1. Determining what is defined as a key indicator e.g. sales value, gross profit etc.
  2. Defining what the performance standard required is – e.g. 70% gross profit.
  3. Deciding how the data will be collected, collated and analysed.
  4. Determining the frequency of data collection e.g. weekly/monthly/quarterly or annually?
  5. Establishing a process and responsibility for performance monitoring.
  6. Collecting, collating, analysing and reporting the data.
  7. Using the data to make meaningful management decisions.
  8. Act on trends rather than isolated variances.

Finally, be aware of the single biggest problem with targets – individual or team – “you get what you measure”. The more pressure that is applied to achieve a target, the more likely it is that the target will be achieved at any cost. Individuals will always find creative ways of hitting their KPI’s, sometimes by fair means or by foul. As we have all seen in some of our public and commercial organisations, this can be disastrous.

Some points of wisdom
  1. Establish a few key quantifiable measures that reflect the business aims.
  2. Determine realistic targets for each measur.e
  3. Determine by whom, how and when the target data will be collected.
  4. Keep it simple – data should generally be reasonably accurate and timely.
  5. If you are spending too much time collecting, collating, analysing and reporting data then it is likely that it will be out of date and therefore of less value.
  6. Absolute results are usually much less important than trends.
  7. Ensure that you use performance data to educate and inform.
  8. Publish summary data so that everyone can quickly assimilate the meaning and implications.

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