Wednesday, June 3, 2020

The Goals for Defining and Assessing KPIs

 Do not confuse the means with the end. The measurement is the means to end.

Digital businesses are dynamic, connected, interdependent, and hyper-competitive. Performance Management is no longer a siloed practice but a multidimensional management discipline by connecting all-important dots with multifaceted perspectives to close performance gaps, make continuous improvement, and improve organizational maturity.

Nowadays, organizations at different levels of maturity perhaps focus on measuring different things and measuring them in different ways. Good organizations do follow a process and tick the boxes. Better organizations measure the important issues as they go along and adjust the plan/objectives/goals as and when required. When defining KPIs, set digital principles, and clarify the goals. Performance should be sustained and monitored at constant intervals to ensure robustness.

To provide objective evidence of current performance towards achieving agreed goals: Performance management is a management control from strategy to the shop floor. It’s all about having a rigorous and sustainable evaluation process to be applied fairly and equally for all. There are both strategic levels of performance and operational level of performance. How well the performance management objectives are directly tied to the achievement of the company's overall business objectives and strategic plan goals.

In practice, measure or KPI is a strong tool that can be both rewarding but also cause damage to an organization. Put the framework in place to map the strategic objectives into KPIs. If the measures have not been clearly identified, you cannot get the true alignment of your organization and all working toward the same goals and outcomes, and you lack clarity and purpose of business direction. The ultimate goal of performance management is to implement business strategy effectively through well defining the right set of measures at both strategic and tactical levels, making a holistic assessment, and taking a progressive approach.

To build management competence and reinforce positive management behavior: The goal of performance measurement is to achieve business goals. It's not the use of KPIs per se, but the applications of those that lead to the desired behavior. Make sure the executive team first understands what it needs to drive future business growth and build management competency to realize it. They need to shift their mindset from developing performance management processes or implementation to developing a holistic performance management solution that adds value to employees, organizational goals, and business results.

Performance Management can provide the desired results for the business by setting correct performance parameters and optimizing performance processes. For example, an interactional management process is developed to help communicate; an interrelational management process is developed to help reduce the tensions, frictions, and conflicts that arise. A data-based process helps to re-enforce positive management behavior. When senior managers routinely demand 'operational data' and start to micromanage the organization, it becomes counterproductive.

To empower delegation and decision making: Performance Management gets "stuck" when the people in charge get "stuck." In many situations, the managers need full autonomy to complete the programs and projects and achieve the desired performance. Otherwise, bureaucrats take advantage. It is possible only when they are empowered and delegated to take needed and on-time decisions. Keep communication open and make an accurate interpretation of overall results when defining data sources and demonstrate outcomes.

The problem with many KPIs is that they are created and applied at a subordinate level without taking into consideration the possible implications for the organization as a whole. It often leads to suboptimal decisions that are detrimental to overall performance. The rule of thumb is: Every measure selected should be part of a link of cause-and-effect relationships, and ultimately affect the growth and long-term perspectives of the organization.

To drive positive culture and behaviors: Organizations need to build a performance-driven culture for encouraging “continuous improvement.” If the top leadership team does performance management thoroughly, then the rest levels of managers do it thoroughly as well. A fair performance management system contributing towards a motivated workforce leads to more productivity and revenues and drives positive culture and behavior. The problem with measurement is that more often, the metric is very subjective. The business performance gets stifled when people spend their time trying to second guess what ''they want” rather than understanding the causes of variation and driving sustainable business improvement.

In performance management practice, one of the biggest problems with metrics, in general, is that, once you have them, people will try to game them. Humble attitude and scientific methodology are both important to improve performance effectiveness. It's fair to say any organization that didn't have a systematic approach to measurement and analysis at both the strategic level and operational level has a giant blind spot that is impairing their performance.

To facilitate its own validation against the measure:
The right metric is requested in the right context, clarify the “big why” of the performance measurement, and identify suspected key indicators. Businesses need to avoid vanity metrics and really focus on key metrics that correlate to better business outcomes. Don’t just scratch the surface to manage the numbers, always understand the contextual meaning of performance data, and ensure the business as the whole is superior to the sum of pieces.

Follow the “SMART” measurement rule to track, analyze, learn, and repeat, to facilitate its own validation against the measure. “S.M.A.R.T” goals are more as a guideline based on meeting the five criteria- specific, measurable, attainable, relevant, and timely. Do not confuse the means with the end. The measurement is the means to end. The managers are accountable for the results of their actions (evidence-based decision making) for driving high-performance results continuously.

Effective performance management is both art and science. Not only shall you measure the tangible or quantitative results, but also you need to assess intangibles that directly impact an organization's culture and brand, as virtuous people and virtuous actions are necessary for the business’s long-term success.


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