AAA for Alignment, Agility, and Accountability using KPIs
The power of personally-assigned key performance indicators, or KPIs, is tremendous. If done incorrectly, KPIs might be used like a drunk would use a light post, for support not illumination. You could call KPIs industry-speak for one method to measure employee, departmental and/or organizational performance. If effectively constructed, they can drive the right workforce actions supporting strategic and operational objectives. KPIs could be tied to achieving an operational goal, such as on-time customer shipments, best-in-class inventory turns, or an industry-leading order-to-cash (Finance) or procure-to-pay (Procurement) process. Selecting the right KPIs is very important because they will drive employee behavior.
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So, how many KPIs is the 'right' amount? Well, I've seen as many as 40 KPIs for certain individuals. Is that a best practice? No. Absolutely not. There are importance levels for KPIs and, in this particular case, the person in question has their primary KPIs and their secondary KPIs. The primary ones drove their behavior (and, by the way, these primary KPIs determined their compensation as should everyone's primary KPIs). So, to answer the question of what's is the right amount of KPIs for each individual, the answer is no less than 4 but no more than 12. If really pressed to give a single number it's probably 6 KPIs per employee. Be careful because if there's too many KPIs they're probably going to spread this individual too thin while too few KPIs might mean there's some activities for which this individual won't focus on as much as you'd like.
The most important element to be aware of is the law of unintended consequences. You want these KPIs to drive the right behavior. Be careful what you measure because it will dictate employee actions, especially if you tie it to compensation (which you should). Invariably people do what they like doing if they're not influenced otherwise. They may be comfortable with some tasks versus others so they do what they like doing most. A set of KPIs by which they're measured will enforce (stick) the right employee actions while, by the way, tying them to compensation (carrot) helps nudge them in the right direction too.
These personal KPIs ensure people are doing the right things and not working on non-essential tasks that don't directly contribute to the organization's or department's primary goals or objectives. If they don't, you can at least evaluate with that employee and/or department head to see if the related activities are important enough to continue doing. KPIs and their targets also provide a benchmark by which to measure each employee's progress not to mention being effective at assigning accountability while better aligning the company. To determine KPI targets most companies will look at industry benchmarks for certain KPIs where actual decisions can then be made regarding what's a reasonable target given not only current conditions but also what the organization's goals are because these KPI targets need to be aligned with these corporate goals and expectations.
KPIs clearly linked to enterprise strategy promotes greater transparency from the ivory tower executive suite down to the people in the trenches. People start thinking about how they can achieve their KPI targets and who the influencers are that can help them get there. They're collaborating more. They have a sense of purpose now. They know what they're supposed to do and they're being empowered to do it. No shades of gray. The corporate culture soon changes. KPIs become the stitching in the corporate quilt. Employees start to learn how to use the KPIs as a guide to clearer thinking in problem solving and weighing multiple options. They'll start asking questions about what data elements, departments, and individuals (internal and external to the organization) influence their KPIs. This is the epitome of using data to drive better decisions. It's partly about the actual data put in front of the individuals or teams; the other part is the resulting questions it inspires and behavior it drives. This is the behavior we're trying to inspire when we talk about the power of analytics and smarter decisions.
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