Metrics/KPI’s – a critical ingredient to Execution
Most companies do their best to set numerical targets (goals) for the month and the quarter. However, they rarely do a good job of setting and tracking Key Performance Indicators (KPI’s) – the small handful of Leading Indicators that you measure on a daily and weekly basis that will ultimately drive goal achievement. And generally they are not comfortable in holding people accountable for results.
KPI’s improve decision-making.
One of the major causes of failure in decision making is poor use of data (or not having accurate data at all). You can take timely corrective action if you have leading indicators and meet daily to review.
KPI’s direct people’s behaviour.
Most employees operate on the following assumption: “Tell me how you will measure my performance every week, and I will behave accordingly.” – It is important to set the right indicators – preferably counterbalance indicator.
KPI’s focus attention.
What gets measured gets done. Employees are faced with many competing demands on their time. When they know the 1 or 2 numbers that their performance will be measured on, it keeps them focused on doing the right things.
KPI’s make performance visible.
You can only manage what you measure. Keeping the scores visible where everyone can see them = visual management, shows you/them how well the various parts of the business are working. And yes, you do want it to be obvious as to everyone in the team as to who is performing well and who is struggling.
KPI’s provide objectivity about performance.
Data enables you to “manage by fact.” Evaluating employee performance is not about whether your people are working hard or being busy. What did they actually achieve?
One final tip:
KPI’s should be graphed & displayed on a visual dashboard to show the current score, and historical trends every day and week. The scores should be color-coded – traffic light system – so that performance can be easily understood at a glance. In simple terms:
Green = The goal (success)
The score exceeds the target level of performance. Make sure you praise and recognize the person accountable.
Yellow = Below the goal (in progress).
Get an explanation about what is being done to improve the score, and keep a close eye on it.
Red = Below acceptable (urgent)
Unacceptable performance. Urgent attention is required to get things on track. You must confront poor performance by having a conversation about the score every week, and write down the specific actions will be taken to improve results.