Getting the measures of success right

Enterprise Performance Management, BI reporting & Analytics – all these disciplines use data to improve decision making of business leaders. Often these executed in parallel by different teams through a tools driven approach in pursuit of so called ‘low hanging fruits’. I submit that challenges to decision making are not as much about the lack of information to leaders but a deluge of detail to contend with as leaders navigate day to day business challenges. Persuasive charts and models presented to the leaders risk side-tracking them to pursue sub-optimal outcomes unless robust and trusted enterprise data foundations are established.

Often dashboards and reports brimming with KPIs are prepared with the best of intentions highlighting deviations from planned KPI values. Explanations are frequently sought and provided on why KPI results are not as expected. Managing KPIs and managing businesses are as different as a car driver focusing on maintaining speed, engine temperature, RPM etc. at certain levels and trends instead of focusing on driving the car on the road.

If businesses could succeed by keeping KPIs at the right levels through actions prescribed by analytical models, bots could substitute leaders in taking these decisions. We still have humans on top in businesses so this is clearly not the case.

There are a few issues with over reliance on KPIs to drive businesses.

1. There are often too many KPIs going around with prescribed ideal values to be planned for and achieved. The question arises whether leaders should spend more time in meetings focused on how the KPIs need to improved (driving compliance) or on their businesses (sparking creativity).
2. KPIs are often subject to interpretation in the way they are calculated. Everyone may agree on the top level definition but calculate KPIs differently claiming unique business scenarios.
3. Decision rights on actions driving KPIs are often not clearly understood and aligned. The way teams and people are measured impacts their behaviours. People want to only take actions and drive progress in what they are measured on often not bothering about the larger perspective of the organisation, which they see as someone else’s concern.

So, what’s the alternative?

1. Align and measure few & vital KPIs across teams to ensure everyone is pulling in the same direction and all teams are focused on the core results that matter to the shareholders.
2. Ensure KPIs are clearly defined and decision rights are clearly understood. There are 3 components to a good KPI definition.

i) The English – This is the description of the outcomes being measured. Definitions can be in any acceptable business language of course!

ii) The Math – This is the way in which KPIs are calculated with their components, also called critical data elements.

iii) The Sources – These are data sources for the critical data elements traceable to columns, tables and databases in enterprise systems so measurements are automated and reproducible by anyone with access to systems of record.

Driving organizations with over-emphasis on metrics tends to spawn mechanical processes driven by compliance and incremental improvements. This is not a substitute for visionary leadership required for driving breakthrough results. It’s time to think differently!

The opinions expressed in this blog are my own and do not necessarily represent viewpoints of my current and past employers or associates. Your comments are welcome.