Nick Frank and Dag Gronevik of Si2 Partners joined Kris Oldland for our latest podcast where the talk was all about KPIs, in this excerpt we look at whether KPIs should be under constant review...
KO: Why are KPIs so important to driving a business forwards?
DG: First of al I think KPIs have one fundamental role and that is to drive behaviour. One of the risks with KPIs, as many people have realised is that they are interpreted and perceived as a controlling measure. But if you look at it from a driving the business perspective it really is all about driving behaviour.
To be able to link that behaviour you are looking at with strategy, budget,what the competition is doing, what customers are expecting... It’s quite a tricky cookie to crack but if you do it right, it is very powerful. One of the things people tend to forget is that we say Key Performance Indicators, there is the word Key in there, so people mix Key Performance Indicators, with performance indicators and it becomes a bit of a soup of KPIs. We should be really targeted on the ‘key’ word.
KO: It is a bit of a hackneyed phrase now but ‘what you can’t measure you can’t manage’ comes to mind. Is it really that simple, that we need to be measuring these things so we can improve?
NF: Actually that’s an old Peter Drucker phrase, but also I think it is quite often mis-quoted. Because he was also of the opinion that yes, you need the measures to gauge and give feedback on performance but actually there are things, part of performance that you can’t measure when your dealing with a person. In fact one of the key roles of a manager is to be able to provide this feedback to their people that can’t be measured or quantified.
[quote float="left"]The really big challenge that we are dealing with here is people and how people react. I think a lot of managers forget this because many managers equate measures with control.[/quote]The really big challenge that we are dealing with here is people and how people react. I think a lot of managers forget this because many managers equate measures with control. They want to control their business, they want to control their people, they want to prove to their bosses that they really know what they are doing.
So they measure everything and they tend to look at what has happened rather than predict what is going to happen and I think this is a mistake that many people make, they have too many and they are always looking backwards.
KO: It’s that rear view mirror approach - i.e. you can’t drive a car forwards competently, if your constantly checking the rear view mirror.
You’ve both mentioned influencing behaviour and influencing people, but KPIs are essentially all about cold, hard numbers, and that is a very rational and logical way of looking at what is not always a logical and rational issue, because people are different and not so easily quantified.
Is that the big challenge in terms of getting the right KPIs - in that we can’t just base our decisions on percentages all of the time?
DG: I think you have certain measure that are unavoidable, especially financial ones, that are measuring trends which are very important to keep there year-on-year, but you might also have KPIs that you might only keep for one year.
For example, a short term project or program or a local project that you want to monitor and give more visibility to. I think that is also an area where you can keep KPIs. But I think it is important to keep that perspective of the long term measure that you can actually see trends, because if you can manage that well, then you also have control of your business.
KO: So are KPIs something that should be under constant review?
DG: I think that you will alays have a core set of KPIs as I mentioned but other than that yes I think so. You have an agenda that you review every year, you have an operational plan and as a support to that operational plan you need good measures to track progress.
Also they [KPIs] allow you to communicate to the organisation, if you are behind - what could be the reasons? Then you have activities supporting all these measures and KPIs so you can actually address the issues quite quickly and effectively.
KO: What is interesting here is the fluidity you describe, that whilst of course you have your solid KPIs at the heart of the business, in addition to that there is this layer of shifting metrics that are adaptable to where the business is at any given time. For me that is something that can be often overlooked, it’s almost like KPIs are carved into stone tablets some times.
On a similar subject let’s talk about the different KPIs that you would set for the team compared to those you would set for management...
NF: I think as a manager you want to be in control of the business, you want to problem solve and you need a level of detail and that’s part of your job - to be able to drill down from high level metrics to the operational metrics in order to do that and in order to answer the questions from your own management.
That’s very different from what you need to do with your people and what you need to do to drive your people. I’ve found if your talking to field service engineers their eyes just glaze over if you start talking in too much detail.
They are just really interested in what they can impact.
[quote float="right"]Managers are one set of stakeholders, but the people who work in your team, who work at the coal face, they have another set of needs and it’s important to recognise that they are different and to actually find the measures that motivate them and they can do something about[/quote] Therefore, it’s actually very important to separate out the two. It comes back to what Dag was saying at the beginning, there is a reason we do this it.
It’s to drive the business forward and be more effective in terms of our processes but also mainly our people.
Managers are one set of stakeholders, but the people who work in your team, who work at the coal face, they have another set of needs and it’s important to recognise that they are different and to actually find the measures that motivate them and they can do something about - so that if they take an action they can actually see that they are impacting how the business is working.
You really should think of them as two different sets of stakeholders therefore you should separate out the different sets of KPIs.
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