“Key Performance Indicators” 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 has a KPI: “Customer calls handled per day”. A troubled customer calls up and is put on hold for a minute and then is answered by a help desk executive who is unable to understand the customer’s issue or help him The customer hangs up.
Is the customer serviced? Definitely not. Is the department’s KPI met? Well, the call was handled. Will it lead to higher customer satisfaction a.k.a organizational objective? Don’t think so. So a measure of 5000 calls managed in a month would actually mean nothing for the organization towards achieving higher customer satisfaction. So would complaint resolution time be a better measure for ‘X’? What if the customer service process doesn’t facilitate the customer to register a complaint? (as seen in the example).
Organizations may have a bunch of KPI’s which they may be proudly measuring but what needs to be questioned is “are the KPI’s reflecting the true picture” and “what is it that they are hiding”?
Global product development processes are essentially complex and only organizations which innovate their way through the maze of competitors, consumers and market dynamics will be sustainable. One of the ways organizations can force themselves to innovate, in line with its strategic objectives, is by evolving KPI’s which are most relevant to them. The business algorithm to evolve and innovate using KPI’s is
1. Cascade organizational strategy down to individual goals for each functional unit
2. For each functional unit, brainstorm and identify KPI’s which will help towards achievement of the goals
3. Roll up the KPI’s up to the organizational level.
4. Create/Update dashboards at each level
5. Identify gaps in KPI achievement (goal achievement)
6. Innovate and improve across product, process, technology and business model to bridge the gaps
7. Do a re-check on strategy : Goto Step 1
Accepted the fact that strategically aligining the KPIs top to bottom is essential. But the serious question here is do Managements invest in process improvements, at the lowest level, that align KPIs at the lowest level with the KPIs at the top-most level, unfortunately the ans in most of the cases is No. This is mainly due to lack of confidence in KPIs defined for the lowest level. Hence even if the KPIs are well defined at all levels & strategically aligned, it may not lead to desired results.
ReplyDeleteThanx for the comment.
DeleteObviously defining KPI's alone is not sufficient. As I've mentioned in step 6 of the business algorithm, business innovations/process improvements should happen keeping your goals and KPI's in the center.
Business managers are key stakeholders in metric definition, sign off on KPI's and delivery on those metrics. It would be contradictory to not have faith in what you own. But this does bring a valid point of ownership of KPI's at all levels. Trying to deliver results on KPI's that you dont believe in is akin to harakiri.