5 min read
This is why your KPIs fail
Every company uses Key Performance Indicators (KPIs). Or, better said: every organization has a few figures they know are important to track and steer by. KPIs are the most important measurements in an organization and give you an overview of how things stand at a glance. Yet many companies fail to work data-driven with those KPIs, or to get their organization on board with working with KPIs. There can be various reasons for this. We list the main ones below.
#1 You have no goal
Okay, fine, you probably do have a goal. But you haven't determined which KPI can indicate whether you're achieving that goal. Or, put the other way around, how your KPI contributes to achieving the goal. Does your company have objectives at the strategic, tactical, and operational level? Or for the long, medium, and short term? Then when setting those objectives, it's a good idea to think about how you're going to measure how far along you are in achieving them. A KPI without a goal isn't a KEY Performance Indicator.
#2 You measure what you already know
A popular misconception is that KPIs exist to monitor all aspects of your business operations. All processes, all departments, all areas. Because every step is important, right? No doubt. But some processes you know are running well even without looking at them. Or their outcome changes so rarely that there's no point putting it in front of everyone every day. For example: employee satisfaction is essential for a well-running organization. But if you only measure it once a year, it's not very relevant to show the employee satisfaction score in your weekly dashboard.
#3 You measure too much
In many companies there's quite a bit of confusion between having an overview and gaining insight. Many managers feel comfortable with broad reports that neatly line up every aspect of the company or department, row by row. This kind of overview report does indeed give a total picture. But overview is different from insight. That long list doesn't tell you where to look. And why waste your time looking at information you're not going to act on anyway? A good KPI tells you when it's time for action, and where that needs to happen.
#4 Everyone is no one
Wonderful, KPIs for the whole company. Management loves having everything neatly visible company-wide. But for an employee at an individual department, or an individual location, such a KPI means nothing. Just like objectives, KPIs also have a hierarchy, and just as in your organization, the KPIs of individual departments and locations contribute to the KPIs of the whole company. Such a KPI cascade lets you bring the relevance of your KPIs back down to those who need to contribute to the results.
#5 You've gotten stuck in your ways
We already wrote that KPIs need to be, and stay, relevant. That also means you need to regularly evaluate whether the KPIs you're tracking are still the right ones. Because where the objectives for your organization change regularly, your KPIs should too. When formulating new goals for the next fiscal year or the new strategic direction, the moment comes to check whether your KPIs still align with this. And so, to stop focusing on the KPIs that no longer contribute to your goals — even if they might still be quite useful!
#6 You can't do anything about it
No, really. Or at least: if you do something about it, it's not visible. Many KPIs are measured cumulatively over a fiscal year. And although that's quite useful for seeing where you stand at the end of the year, it gives you little opportunity to evaluate the effects of your actions. A good KPI measures on the same timescale as the process it's meant to measure. Do you have a weekly operational process? Then your KPI should show results on a weekly basis. This way you prevent attention from slipping over the course of the year because the figures no longer change due to small improvements.
#7 You're not unique
Of course you are. And so is your organization! So why do you measure the same things as everyone else? Every management course teaches you the standard measurements that let you know how your company is doing. And the corresponding KPIs. And if you stick to those KPIs, you'll probably get quite far. But you're missing your own input. Because why did you ever start this company? What makes your company unique? That distinguishing factor is what should set your offering apart from the rest of the market. Are you also measuring whether you're doing that?
Data is everywhere. That's exactly why it's important to make clear choices about which data is really of value for your processes, objectives, and vision. With the right data and the right KPIs, you truly know where you stand — and where you're steering toward!
Getting started with your KPIs?
After reading this blog, do you think your KPIs need another look? We can help you with that. Think, for example, of an extensive KPI Workshop. Want to discover right away how you can improve your KPIs? Then check out our on-demand webinar “The KPI Trap.”
Written by Louis de Roo
Data Strategy Leader
E-mergo