Google’s new cross-industry survey about key performance indicators (KPIs)/Goals, shed light on the challenges and emerging opportunities companies face when using KPIs, demonstrating the many ways advanced use of KPIs can benefit organizations, and offer steps leaders can take to make the most of KPIs going forward.
Old school managers (who tend to lead their organizations based on books written in the 1950s), use KPIs (or Goals) to (micro) manage their organization and measure the performance of each individual based on their past. These KPIs are known as Measurement Capable and Measurement Challenged.
Use KPIs to lead teams rather than to manage individuals
Let’s quickly have a look at the obvious downside of when KPIs are set for individual team members rather than for the teams. Then we will explore how modern organizations use KPIs to lead rather than just to manage.
The first obvious downside of an individualized KPIs is that the team spirit will die out and a given team will fail to operate as a unit with a shared goal. This becomes even a larger issue when KPIs or goals are bound to bonuses and remunerations, as each person will focus on ticking their own goal off in order not to sabotage their bonus, rather than helping the team to thrive and perform at its best.
For those who need numbers rather than common sense only, I have done a mathematical calculation which proves my point!
So now that we have the proof that team KPIs are way more efficient than individual goals, it is worth noting that rather than focusing exclusively on how KPIs can help them manage their organization, leading companies look to KPIs to help them lead — to find new growth opportunities for their company and new ways to motivate and inspire their teams. Simply put, KPIs will be used as a guide for a better future rather than for the past.
Use KPIs to align the organization
Now that we have proven the obsoleteness of individual goals, we can see how the team KPIs can help align the different teams or departments effectively because an organization cannot succeed if they isolate internal, employee-related KPIs and financial or process KPIs from the customer experiences (they endeavor to create). Leading organizations use KPIs to effectively align people and processes to serve the customer and in general the company vision.
But how team KPIs can be used for organization alignments? How do we know what the client KPIs can or should be?
To answer this question we need to remind ourselves that KPIs are a tool for leaders to set the right vision and come up with correct strategies for their future. Thus, in order to use KPIs as a navigator rather than a performance management tool, KPIs must be turned into insight, or simply put, into data!
One major data that can help us, leaders, to come up with efficient KPIs that can serve our customer and our brand is customer feedback. If the customer experience is recorded and processed (by data analysis experts) then it can offer us invaluable insights which can be used by product managers, marketing leaders, sales directors as well as by the executives.
Although the fast pace and smaller companies must be careful not to slow themselves down by waiting for insights before making every decision, we must look at insights as our guide to set the strategies right.
Use KPIs for machine learning
Now that we live in the machine learning era and artificial intelligence is booming, ML/AI technologies can help us achieve enterprise goals.
The greater potential of ML is empowering software and systems to learn from data-driven experience. This creates opportunities to use KPIs and their underlying data to “train” ML algorithms. That is, KPIs can be used, individually and collectively, to teach AI systems to improve and optimize their performance.
KPIs are not the target, they are tools
There is no magic number for the optimum number of KPIs for an organization or a team. While a properly set number of KPIs could compel the managers to bring a laser focus to the team’s most essential strategic goals, too many KPIs easily become unwieldy, unmanageable, and create unrealistic expectations; too few might result in the neglect of critical business issues.
From my experience, the best way of coming up with the right number and reasonable complexity of KPIs, is by both learning from the past and by adhering to SMART goals.
As we learned before, KPIs are for us, leaders, to learn from the past. So if by looking at past data we learn that the team failed to deliver their goals in time or with the desired quality, then the KPIs must be reviewed.
One common issue with the KPIs and Goals, especially when there are too many of them and when they are set for each individual person in the company, is that goals deviate from being SMART. SMART goals are Specific, Measurable, Attainable, Relevant and Time-bound. When companies set goals for each individual team player, making the KPIs specific becomes hard and the expected outcome becomes vague. Even more so, in a fast-paced organization, since things change frequently, goals tend to lose their relevance and attainability. And this sets the teams and people to failure.
What do we learn?
We learn that individual goals and/or KPIs are frowned upon in modern leadership. Teams can deliver way more efficiently if KPIs are set for the team rather than for the individuals.
We also learn that KPIs must not be for measuring the performance and should not be bound to remuneration and/or bonuses. At least not only for that. Rather KPIs must be used for better future strategies and for better alignment of various teams and departments in the organization.