Making KPIs Work!

By Chris Chittenden

"We know nothing about motivation. All we can do is write books about it.”

… Peter Drucker

Over my many years working as a coach, some topics just seem to show up over and over again; and not in a good way! One of these topics is the use of 'Key Performance Indicators' (KPIs) in organisations.

If you have ever worked in a large organisation, you will almost certainly have been subjected to some of the concepts of 'Management by Objectives' or MBO. MBO was first popoularised by Peter Drucker in his 1954 book, 'The Practice of Management'. The most common elements of an MBO program are clear and specific goals, participative decision making, explicit performance periods and performance feedback.

Although the full practice of MBO is rarely seen these days, some of the principles still remain. One of these is the use of performance feedback systems which is where KPIs come in. The idea behind MBO was to keep organisations focused on their objectives such that they can achieve what they set out to achieve. Central to this is the idea that group and individual motivation will be stimulated through connecting financial rewards with group and individual outcomes. Hence the use of KPIs as a means of setting goals, giving performance feedback and providing rewards based on achievement. This is a very rational approach to measuring and managing performance and has been very appealing to many organisations looking to systematise their approach to managing their people.

However, what many see is a good idea in principle often fails in application. Let's look at a couple of aspects of why this happens based on the ontological approach.

The use of KPIs is predicated on the idea that they will motivate individuals to stay focused on their goals. Yet two things stand out here. Firstly, in the fast paced world in which we live, what may have been an appropriate goal three months ago may no longer be relevant. Secondly, for individuals to stay focused on their goals, the KPIs need to be a constant reference point.

The basic premise of the ontological approach is that human beings always live in the moment. In that moment, we tend to respond through habit unless we are aware of being in that moment and decide to do something that may not be habitual.

Based on this premise, if KPIs are to prove effective then individuals have to keep those KPIs frequently in mind and constantly make decisions within their context. Yet, this is rarely the case. It seems that many people only refer to their KPIs when the topic is brought up during reviews. It is not unusual for this to only occur every six months or so. Even if the conversation happens every month, it still might not be enough.

Think of the use of KPIs in the context of setting daily priorities.

Setting daily priorities seems to be a challenge for many people. Most people tend to be quite reactive in their approach to their daily activity. This approach is exacerbated by feeling the need to process the large quantity of email and messages that many people receive every day. As a result, what people do each day is more often what shows up in front of them than what will help them achieve their goals in a larger context.

Here are some thoughts on how to use KPIs more effectively:

  1. Initially ensure the KPIs are developed in a way that are both realistic and within one's capacity to achieve;
  2. Regularly review KPIs to see if they are still relevant to the current situation and alter them if need be;
  3. Look at your KPIs each week and see what actions you will take to progress them;
  4. Use those actions to help you establish your daily priorities;
  5. Use those daily priorities to negotiate and manage what else shows up during the day.

The challenge for many aspects of organisational activity is how to make them relevant in the context of living in the moment. Although I have spoken about KPIs here, similar breakdowns occur in terms of the daily relevance of other aspects of organisational life such as values. It is one of the key reasons for the 'knowing-doing gap'.

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© 2016 Chris Chittenden