Measures what matters

Some of you asked: HOW should I choose the KPIs that work?

The problem with measures is that we tend to choose too many KPIs regardless of its relevance to the business strategies. Some things in business are easy to measure because we’ve measured them for a long time and the data is almost automatically captured, such as costs, revenue, profit, staff turnover, workplace injuries..Because of this ease, we too often default to these kinds of KPIs for our goals. The problem is, they are often measuring effects too far removed from the specific goal we want a KPI for.

Then, make it worse, we tend to link such KPIs to incentives, such as a bonus or pay rise, which is really dangerous in business because it so easily creates unintended consequences.

The true purpose of a KPI is to provide evidence to help people inside the business know where they are in relation to where they want to be. They act like a compass on a sea voyage. But, once those KPIs are linked to incentives, they stop being a navigation tool and become a target an individual has to hit to secure their bonus. And, as soon as that happens, the individuals involved can become very creative in how they can manipulate the information or their behaviour to ensure they receive the incentive.

So, how to fix these problems?

First, you can start by mapping out the measurable results that are relevant to the business strategies. The result should be observable, right? so before choosing the measures, describe the results with the evidence you’d see, or hear, or touch, or observe or detect, then quantify it.

Then, change your belief that individuals' performance can be increased by financial incentives, well, incentive approach could work for highly repetitive roles, sales maybe, or labour work, like trades, but for the most knowledge worker, like us, our roles are more complex, multidimensional and interconnected. We probably don’t do the same thing over and over every day. The quantity and quality of our work are highly likely to be affected by other people on our team, and/or other functional areas of our business. You will better off with a team-based or even company-wide incentives encourage collaboration or teamwork, or unity of purpose... that would make a huge difference to the overall performance.