By Stacey Barr
Which KPI methodology works best for your sector or industry or organisation size or culture? It’s the wrong question. The right question is which KPI methodology works best at producing the right KPIs for your organisation’s unique strategy.
If you work in the public sector, and you look over at what the private sector are measuring, you’ll be quick to decide that all those sales and profitability measures don’t suit you.
Likewise, if you’re in the non-profit sector, and you look at what government is measuring, you’ll feel it’s all too much about budgets and efficiency and not enough about the softer things that matter in social-good organisations.
This is natural. Different sectors – and indeed, different industries – will find different types of measures or KPIs more useful in their context. So it also feels natural to assume that different organisations need different approaches to selecting their measures or KPIs.
But the assumption is wrong.
Looking for a bespoke KPI (performance measurement) approach is a mistake.
It’s not the performance measurement approach that needs to fit the organisation; it’s the strategic direction.
The strategic direction for a commercial organisation is going to focus on different results to a charity or a government agency. The strategic direction for a manufacturing organisation is going to focus on different results to a service organisation. A boutique gym is going to focus on different results to a multi-national mining company.
In fact, I believe that the strategic direction of an organisation is as individual as a personality. It’s the composite reflection of the organisation’s unique strengths, weaknesses, values, culture, desired future, customer perceptions and needs (and more).
Strategy is bespoke, not your performance measurement approach.
Because each individual organisation is unique doesn’t mean that each organisation needs its own bespoke performance measurement approach. Rather, it needs a performance measurement approach that is capable of producing the bespoke set of KPIs that directly match its strategy.
A good KPI approach is more like a recipe than a platter of cupcakes.
Everyone, in every type of organisation, can use the same basic KPI approach, but only if that KPI approach has all the qualities that rigorous methodologies have.
A good performance measurement approach works for everyone.
The reason that a good performance measurement approach – one that is rigorous and deliberate – works for everyone is that it’s a process, not a solution.
A good KPI approach will focus on what’s important for you to measure, and it will help you decide or design the measures that are the best for your situation. And it will help you implement those measures as feasibly as possible, and use them to inform your decisions and improvement initiatives.
That’s why KPI shopping lists, brainstorming, industry benchmarking and expert opinion don’t work. They’re not rigorous and deliberate KPI approaches.
But is your current KPI approach a good one?
Try this self-assessment to test if your current KPI approach, or one that you’re considering, has all the essential qualities that any good methodology should have.
The self-assessment also includes a five-minute video of what these essential qualities mean, and a 10-minute video about how good several common KPI approaches really are.
Your organisation’s strategy is bespoke; not its performance measurement approach. A good performance measurement approach works for every organisation, in every sector and industry.
What KPI approach are you using? Tell us how well it meets the criteria of a good KPI approach.
Stacey Barr is a specialist in organisational performance measurement and creator of PuMP, the refreshingly practical, step-by-step performance measurement methodology designed to overcome people’s biggest struggles with KPIs and measures. Learn about the bad habits that cause these struggles, and how to stop them, by taking Stacey’s free online course “The 10 Secrets to KPI Success” at http://www.staceybarr.com/the10secretstokpisuccess.