Many organisations have a KPI mess: too many useless measures, not enough of the right measures, and little idea of exactly how many measures altogether. This mess is an unnecessary cost, and it’s not that hard to clean it up.A KPI mess costs you more than you think. Take Martin, for example. He managed a freight business that had lots of KPI reports, and yet felt he didn’t really know what the business’s performance was actually doing.We did a simple audit of all the KPIs his business produced, and found out some shocking things:
There were over 300 KPIs, many of which were different versions of what should have been the same KPIs.
There were nearly 50 KPI reports produced by various analysts, every month.
The 50 reports and 300 KPIs were taking more than 1,200 hours of effort every month to produce.
This effort was costing the business $480,000 a year (assuming the average hourly wage for an analyst is $40).
Martin was spending about half a million dollars a year on information he didn’t trust and couldn’t use.
Our KPI audit wasn’t just to quantify this bad news. It was the starting point for cleaning up the KPI mess. There are some essential bits of metadata we captured about each KPI, so we could make decisions like these:
Which business goal each KPI aligned to.
What the correct calculation of each KPI should be.
Which KPIs could be killed off.
The essential bits of metadata to capture for each KPI, in a KPI audit, are these:
The KPI’s name: Delivery Cycle Time
A description of the KPI, that makes it’s quantification clear and unambiguous: A weekly average cycle time of all the services we ran from loading the customer’s product at their mills to unloading the product at the port
The business goal or result the KPI directly relates to: Customers get their goods when promised
The calculation formula for the KPI: sum of (unload end time – load start time) for all deliveries, divided by total number of deliveries
The source data for the KPI: Operations Log Database
The owner of the KPI: Service Deliver Manager
That will do, at least for getting your KPI mess cleaned up. In my performance measurement methodology we use a fuller Measure Definition framework, to make sure each KPI has a single and complete instruction for implementing it.
Look, I know a KPI audit isn’t everyone’s idea of fun. And if it’s not your idea of fun, then find a few colleagues who really love cleaning up messes and diving into details to do it.Every once in a while we need to clean out the fridge. We need to get rid of the expired milk, the limp lettuce, the waistline-sabotaging triple chocolate fudge swirl ice-cream, and create space for kale and apples. Otherwise we’re wasting energy and space on keeping rubbish.Don’t waste energy and space on rubbish KPIs.DISCUSSION:
Do you have a system for organising and maintaining a current and accurate set of details for all your organisation’s KPIs or performance measures?