Measure What Matters

It is said “What cannot be measured, cannot be managed.” While this is true – much of what gets measured only goes to create more noise than ever. Before you set up a measurement, use these three questions as an acid test.

1. How does this KPI align with the overall direction of the organization, and which upper level measurement does it feed into
2. What is the leverage ratio of this KPI vs. others that feed into that upper level measurement
3. Has, or will the measurement method and computations be standardized – and subject to change control?

Management and leadership teams need Key Performance Indicators and set them up in the form of a dash board. Review of the KPIs then occurs on a regular basis to track performance. However, if the KPI fails the acid test – it can do much more harm than good.

While measuring and monitoring KPIs is a good practice – one should not forget that just because something can be measured it is the best metric. Often times extreme lagging KPIs are on the dash board. One needs to measure what matters, and, preferably high impact leading metrics.

Take for example customer complaints. It is a valid and important metric, however, it is too late in the game since the damage is already done; the customer had a bad enough experience – to the point that they decided to complain.

What are examples of leading metrics that could have predicted a spate of customer complaints? Consider tracking these – of course these are not universal, and you will need to find / create specific ones to fit your organization’s needs.

• Proficiency levels of staff in new business processes / SOPs
• Ratio of new hires to total staff
• Rate of new product introductions
• Internal defect / error rates
• …

Each of these can impact customer complaints (an extreme lagging KPI).

So the next time you see KPIs on dashboards – ask yourself:

• Are they extreme lagging indicators?
• Are they actionable?
• What might be leading indicators that would enable you take proactive steps?

Would you like to have your KPIs analyzed for usability and effectiveness? Let’s chat – you can reach me at rai@thekpisystem.com or feel free to call me at: 512-560-8326.