Sustainable Value Chain
5th December 2017
To do or not to do
5th December 2017

What You Measure is What You Get?

What You Measure is What You Get?

I am totally and utterly confused by the way the term Key Performance Indicators (KPIs) are used and often abused in business. It is true that effective KPIs are closely tied to strategic objectives but organisations make the mistake by forcing the entire company’s strategic objectives onto every position within the organisation.

Is it not true that KPIs must be linked to what we have known as Key Performance Areas (KPAs)?
A KPA might be defined as a company’s primary or support activity (a la Porter’s Value Chain) or possibly a capability required in order to deliver a primary or support activity. Because these activities are defined at a high level of the organisation it is OK that we refer to them as areas.

You will agree that an organisation’s KPIs for say example the SALES area will differ drastically from the KPIs for an area focusing on Maintenance – both Key Performance Areas. In the SALES area we might have KPIs such as “Grow customer base” or “Gross Profit Margin” or “Units sold”. Now, depending on the strategy of the organisation, specific goals will be given to individuals or roles (sales person) such as – You need to achieve an average gross profit of 35{cd059166b4988bfb056ea68eda6901e3d6c76ee755df57c8b8242155e3a31cd9}.

However, this can never be the end of the discussion. The individual has to then determine how this will be achieved. This will always relate to the work, or the series of activities that need to be performed in order to “close a sale” speaking to the example above. It is then only logical that activities need to be measured and this measurement must then be reflected in the detail plan on how the individual will achieve the very specific goal. This then relates to a generic KPI that in turn is linked to a specific KPA.

Without this detail implemented the organisation will almost never achieve the required results that are being measured.

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