Improving Performance With KPIs

How to use KPIs and performance measures to improve organisational or business performance.

Putting your performance measures or KPIs to use is how you get the return on all that invested time and money associated with choosing them, implementing them and reporting them. Improving performance with KPIs is the entire reason we have them.

Improving performance is the ultimate purpose of KPIs.

So make sure you do get great performance improvement by getting the most out of how you interpret and use your measures. Here are some ideas (email this page to yourself or a friend):

• Step 1: Consider if your KPIs need targets, and what types of targets will suit.
• Step 2: Make sure performance gaps are accurately displayed in your KPI graphs.
• Step 3: Have the right kinds of conversations about the KPI results.
• Step 4: Focus performance improvement on root causes, not symptoms.
• Step 5: Treat improvement like any experiment – test for success.
• Bonus: Keep learning more about improving performance with KPIs on the Measure Up blog.

Step 1: Consider if your KPIs need targets, and what types of targets will suit.

It’s not uncommon for people to set targets before they have decided what their performance measure or KPI is. It’s not logical to set targets before you set the measures, but it’s also a recipe for meaningless targets. When you set your KPI targets, make sure they match your measures.

Targets don’t have to be a quota that you have to hit every week or month. The most useful targets for driving continuous and sustainable performance improvement are not about quotas, but about capability.
There are three types of target you can set to improve capability: average level, predictability, and threshold.

And finally, don’t make the mistake of thinking that targets are just about setting numbers. How people feel about targets matters even more. So check that you have the three human conditions for targets to work: support, belief and buy-in.

Step 2: Make sure performance gaps are accurately displayed in your KPI graphs.

In PuMP, we use XmR charts as the only way to graph our KPIs. Sure, we use other charts for analysis of performance data. Like Pareto charts, scatter plots, bar graphs and so on. But the XmR chart is the most objective, clear and accurate way of tracking changes in performance over time. It’s fairly easy to create an XmR chart too, so worth trying.

The advantage of using XmR charts for improving performance with KPIs is they make the gap between as-is performance and target performance objectively clear:

• Firstly, XmR charts provide an accurate baseline for current performance.
• Secondly, XmR charts provide clear comparisons between actual performance and target. (Notice where the target is in this example.)
• Thirdly, XmR charts track change over time toward your target, with clear rules for signals.

Step 3: Have the right kinds of conversations about the KPI results.

It might seem obvious, but KPIs don’t make the decisions for us. We need to use the KPIs in the right way, to make the decisions. But how well we can use KPIs depends on how well we can talk about what they’re telling us.

Data-based decision-making needs courage. So, a good mindset for your decision-making team to practice is one of stoicism, rather than heroism. You want to learn from the KPIs, not be threatened by them. There is no failure, only feedback that we can learn from.

Always remember that it’s not useful for people to be accountable for hitting targets. It’s much more useful for people to be accountable for monitoring, interpreting and acting on KPIs.

Also, make sure you don’t interpret your KPIs individually, like a tick-and-flick exercise. The real opportunities for performance improvement lie in the spaces in-between the KPIs. One KPI or performance measure on its own isn’t going to tell you much. Often you will need to use triangulation with those measures, to get a fuller picture.

And if your KPIs or performance measures aren’t telling you what you really need to know, you might need to improve your skill in setting meaningful KPIs.

Step 4: Focus performance improvement on root causes, not symptoms.

In business, we always lament how resources and time are so limited, and yet we have so much to get done. This means that whatever performance improvement initiatives we invest in, they need to be high-leverage.

The key to finding high-leverage performance improvement initiatives is to first find the root causes that constrain performance. In other words, as-is performance isn’t at target yet because something is holding it back. Not someone. Something. Turn to your business processes, because that’s where 90% of the performance problems are.

Just like in this billing process example, the root causes that constrain performance are often not obvious until you start digging. This becomes easier when your KPI system is built in a way that grows its diagnostic power. You can learn more about building diagnostic KPI systems here. Or jump to a quick visual of the PuMP Results Map that shows the same concept.

Step 5: Treat improvement like any experiment – test for success.

Any kind of strategic initiative, change initiative or improvement project is basically a business experiment. You don’t know if it’s going to work, or how much it’s going to change performance. That’s fine, but it means we need to be serious about testing the success of our initiatives.

Business experiments don’t have to be complex and “science-y” to help us successfully isolate and test the impact of our initiatives. We can use three different types of experimental testing:

Before-and-after, which is basic time series analysis, and done best with XmR charts

Controlled experiment, where you execute your strategy in one area, but deliberately not in another area (until the impact is proven)

Multi-variate analysis, which in its simplest form is a collection of time series graphs you can visually examine for correlations

Strategy execution, and any kind of performance improvement, is often iterative. Just like learning and evolving.

Bonus: Keep learning more about improving performance with KPIs on the Measure Up blog.

There is a continually growing collection of tips about improving performance with KPIs on the Measure Up blog.

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