The intense competitive environment in which companies operate today makes it imperative to have a timely feedback loop to communicate operational signals to key decision makers.
KPIs represent an important arsenal in the toolkit that companies are using to address this challenge. However, several companies continue to limit their potential by having a gun focus on KPI selection.
KPI selection and adoption should be a well thought out process with periodic refinements based on operational and market realities. A facilitated KPI development session is an effective way to get this process in motion.
There are four fundamental keys to offering a successful session:
- Partnership with staff, unions, key suppliers, and key customers.
- Transfer of power to the front line
- Measure and report only what matters.
- Linking performance measures with strategy through critical success factors.
As a facilitator, your role is one of mentoring and not one of project leadership.
You should be prepared to address the following questions:
- Why are performance measures being introduced?
- How the performance measures will be used.
Across those broad categories, you will be faced with very specific questions. Here are some of those types of questions you can anticipate and suggested answers.
Why are we being asked to cooperate in the introduction of performance measures?
Emphasize that the way these performance measures will be used will be quite different from previous applications.
Unlike passing performance measures from top to bottom, employees are in the middle of this initiative.
Also explain how the performance measure fits in with other strategies, especially with highly visible ongoing company-wide initiatives (examples are customer focus, quality improvement, etc.)
Why does management need new performance measures?
Emphasize that the new approach is for everyone in the organization and not just for management. Emphasize that these new measures are broad in scope to allow everyone to focus on what determines the health and success of the organization.
This is seen in relation to customer focus, financial performance, learning and growth, internal process.
Who will decide what is measured?
Each functional team must decide what to measure. They should focus on three criteria:
- How can the team affect the critical success factors of the organization as a whole?
- Ease of use of the measure and ability to take measures based on the information provided.
- Verification process by the KPI team and the senior management team.
How many performance measures do we need?
There is no perfect number of KPIs. However, keep the following in mind:
- Have you covered all the critical success factors?
- Can you easily sustain the number of performance measures you propose to use?
- Does each particular performance measure provide useful information that the team can use to analyze and improve the key processes for which it is responsible?
What happens when a goal or KPI objective is not achieved?
The SMART principle is always applicable. However, when a team cannot meet the stated objective or goals, it is not a crisis.
The focus should be on analyzing why the goal could not be achieved.
Through this problem-solving approach, the team can identify and progressively remove barriers to goal achievement.