“Not everything that you can count, actually counts’
Einstein is credited with this quote. He as usual was completely correct.
In the 1750′s Jedediah Buxton was taken to see Shakespeares Richard III performed by David Garrick at the Drury Lane Theatre. At the conclusion upon being asked his opinions he answer that there were 12445 words. He missed the point though his word count was accurate.
This is very applicable to business. I was just reading of person who said in the organisation she worked for she had the responsibility for 137 Key performance indicators. She went onto to say that she only concentrated on 7 but those 7 may not necessarily be what her management focused on. 137 KPI’s show an organisation that is counting everything they can count.
It seems that business can lose sight of what the role of metrics in an organisation is.
These metrics are are known as KEY performance indicators. Something is key when it is of fundamental importance to the business. It is key if it is a make or break, the difference between success or failure. There is no way that the 137 KPI’s are all key to the businesses success.
The success that needs to be considered is that which is important in the eye’s of the customer. We need to define success the way the customer does. This means that we need to completely understand the customer. What is it that they like and hate about your organisation? Often the core product or service is not what the customers sees as the value from dealing with your organisation. It is usually a number of little items that surround the delivery of the core product or service.
The next aspect is PERFORMANCE. It is the items that the organisation is performing and whether they are delivering on this promise. Performance is around those things / processes that the organisation can control. For instance an agricultural company is significantly affected by the weather but it can not influence or control this.
The last word in the trio is INDICATOR. Indicator means it is providing information on future performance. Because it is easy to measure history ie balance sheet we spend too much time and effort on these. We need to spend the time on developing indicators that give us information that we can make decisions about the future on.
Lastly another significant problem of counting everything eg the 137 KPI’s is that nobody focuses on them. The person I relate was only concentrating on 7 but her manager may be focusing on a different set. A lot of time and effort was being spent to collect this information but it was wasted. A key purpose of implementing KPI’s is to provide focus for the organisation to achieve its KPI’s. With some people focusing on some KPI’s and others concentrating on a different set you automatically set up a situation for tension.
Focus on what the customer defines success and implement KEY PERFORMANCE INDICATORS around this.
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