Measure to Manage – The importance of KPIs ... and vampires / Jim Hartigan / September 2010

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Measure to Manage –

The importance of KPIs ... and vampires

By Jim Hartigan
September 2010

Before I get all numeric on you, I wanted to state for the record that I am not now, nor do I aspire to be, a vampire. As such, this particular article is intended for non-vampire managers. If, by chance, you happen to be a vampire, read no further as nothing here will be of interest to you. That said, I am told werewolves will find it to be of value, too.

Now that we’ve got that out of the way, you are probably wondering - is this going to be some boring article about the importance of a good budget? The answer is – “of course not.” Then you might be thinking; well, Mr. I-don’t -want-to-be-a-vampire, why should I measure performance of different types within my business when my boss (who actually is a vampire) only cares about my Profit and Loss statement anyway – so isn’t that bloody enough? Is the P&L enough? The answer here remains the same - "of course not." While the dollars and cents are important, dare I say critical measures of success, they are far from comprehensive. To paraphrase what has been written in many a business article, book, blog, and, reportedly, Van Helsing’s diary: “what gets measured gets done” and, I believe, conversely “what is not measured gets very little or no attention whatsoever.” As a non-vampire manager, why should you measure various business outcomes – in order to focus your organization’s behaviors and efforts, that’s why! Even a zombie knows a good performance measurement system will help your organization achieve success by illuminating opportunities while guiding actions and behaviors that actually “make the needles move.” It will work in five ways¹:

Establish your current position
Communicate direction
Stimulate action in the most important areas for your business
Facilitate learning
Influence behavior

So there you have it - not one, but five compelling arguments as to why it’s important to carefully (and frequently) measure performance within your organization. By digging beneath the surface and exploring more than your profit and loss statement, you have the ability to discover the source of your organization’s successes and, if you’re lucky, opportunities for improvement. If you know the sources (levers) of your success, you have a clearer recipe for future success. This may seem obvious, but I can’t tell you the number of times I worked with a group and thought; “they really have very attractive veins in their necks, but as managers they don’t know why they are performing so well – which means when things go south, they really won’t know why that’s happening either.” Scary and not anything like the recent spate of vampire movies, I know. When you measure the right things, you’ll be able to celebrate successes today and navigate a clear course for your future success tomorrow. Presumably, vampires have a lot of tomorrows, so it’s a pity they aren’t able to benefit from this article.

If you are still reading, then you clearly buy into the “why” behind performance measurement. Good for you and thanks for joining the movement (and not being a vampire). Now you might be wondering; OK, smart guy, but what do I measure? The answer and foundation of a good management measurement system is the Key Performance Indicator (KPI). And what, exactly, is a KPI? As defined by author Kent Bauer (who is most assuredly not a vampire), “KPIs measure the business health of the enterprise and ensure that all individuals at all levels are ‘marching in step’ to the same goals and strategies.” ^₂ But selecting the right KPIs to measure is where the magic lies. You must identify those measures that truly are critical to your business and are not just “noise” or merely activities and not outcomes. Selecting the wrong KPIs can do more harm than having none at all, for they can create bad behaviors that could destroy long term value in your business! (Bleed it dry, so to speak.) To help answer the question at hand (what are you supposed to measure?), your KPIs can fall into two categories:

Strategic Measures: - Competitive strength, relative market share, organizational culture, training and development, etc.
Operational Measures - Customer satisfaction, product or service excellence/quality, return on capital, team member productivity, etc.

Ideally, a balance should exist between your strategic and operational KPIs. Don’t get too focused on one aspect of your organization. Speaking of balance, your KPIs should also represent cross-organizational measures. To once again quote Kent Bauer, “Ensure that KPIs are not defined in functional or siloed terms.” Balance, folks: it’s the name of the game. Like a Type O donor, your KPIs should be “universal,” so-to-speak.

At the end of the night, successful management systems provide more than just numbers and graphs, they will help your organization improve the following ³:

1. Feedback that tells you whether you are – or aren't – doing the right things, and doing them well. Tools, including team member surveys, are available to help in this department OR Companies that specialize in team member surveys are available to help you.

2. Motivation that will spur you on to improve your performance

3. Incentive for you and your team to “do it better”

For all this to happen, you must make sure that you measure the right things at the right time and in the right place! If you can check “yes” next to each of those points, you’re still not a vampire but you will be well on your way to helping your organization achieve success now and in the future! Until next time, remember to Take Care of your Customer, Take Care of Each Other, and Take Care of Yourself!

¹Balanced Scorecard In a Week, Mike Bourne and Pippa Bourne
^₂ Information Management Magazine, September 2004
³ Source: Vadim Kotelnikov – Ten3 Business e-coach

About the Author:
Jim Hartigan, Chief Business Development Officer and Partner joined OrgWide Services, a Training/e-Learning, Communications, Surveys and Consulting firm in April 2010 after nearly 30 years experience in the hospitality industry, including the last 18 as a senior executive with Hilton Worldwide. Jim’s last position was that of Senior Vice President – Global Brand Services where he provided strategic leadership and business development and support to the $22B enterprise of 10 brands and more than 3,400 hotels in 80 countries around the world. His team was responsible for ensuring excellence in system product quality, customer satisfaction, market research, brand management, media planning, and sustainability.

Contact:

Jim Hartigan
Chief Business Development Officer & Partner
OrgWide Services
165 N. Main Street, Suite 202
Collierville, TN 38017
office: 901.850.8190 Ext. 230
mobile: 901.628.6586
[email protected]
www.orgwide.com