When Good KPIs Go Bad

Determining KPIs for your organization (department, team, employees) is as much art as it is math. That's because all your calculations and planning won't get you anywhere if your employees aren't motivated by the KPIs (what you measure) or your goals (how much progress you want). Keep your KPIs and goals fresh if you want to keep people engaged in your goals.

Freshness Matters in Fruit and KPIs

I was recently cruising the internet for conversations about KPIs (as one does) and found this article called "3 Reasons Why Your KPIs Are Failing and What To Do About It". I love a catastrophe story as well as the next person, so I read on. It's an interesting read, and the thing that stood out to me most was that KPIs fail if they are uninspiring. Now some of you may wonder why a key performance indicator should be inspiring at all (if you're thinking that way, you've been hurt by KPIs and I want to help you heal). KPIs ARE inspiring! But only if the human part of them is present. In my book Measuring Success: A Practical Guide to KPIs I deliberately titled it about success because what's more inspiring than success?! 

First, let's separate KPIs and goals. Think of KPIs as what you measure and your goals as how much change you want to see in those KPIs. Key performance indicators are the things you measure to track the health of your organization, department, or whatever (life?). This is the profit margin, or the manufacturing throughput, or customer satisfaction, or whatever metric tells the best success story. Your KPIs should be pretty stable year over year (assuming your business is stable). Goals, in contrast, can change yearly, quarterly, or even monthly because they're the results of your day-to-day initiatives. If one of your KPIs is customer satisfaction and your goal is a 10% improvement in that KPI, that goal becomes the motivator. 

The point the author of the article makes is that KPIs (goals) are demotivating if they are too hard or too easy. Yep, that's true. There is an art to knowing how much to challenge a team without overwhelming them. But in the absence of that kind of artist, there is also math. Knowing the historic performance of that KPI will help predict what's possible in the future. Let's assume the 12-month average customer satisfaction score (on a 1 - 5 scale where 5 is the best) is 3.7, ranging from 3.2 to 4.2. A 10% improvement is 4.1 (4.07) which is within that historic range. That means the team has achieved that score before and it's likely within the current capability without making huge process changes. If the goal is set outside that historic range, and significant process change is not part of making the goal, that will be demotivating because there won't be a clear path to achieving it. 

Improvement in KPIs means understanding your team and your process and what both are capable of.