How to tell if business performance has shifted

Photo by Martin Adams on Unsplash

On average, 90% of organisations don’t have Key Performance Indicators (KPIs) that give direct evidence of whether their strategic goals are being fulfilled and delivering what’s required.

Equally, 86% of organisations have measures that aren’t real measures or demonstrate strategic success.

– STACEY BARR, FOUNDER OF THE PUMP PERFORMANCE MEASUREMENT BLUEPRINT WORKSHOP

Key performance indicators (KPIs) or performance measures should give us objective feedback on whether an organisation is moving in a positive or negative direction.

However, if you are truly interested in understanding the components of performance, and your impact on it, you should ask yourself a truly objective question: would the KPI (or measure) have moved if we had done nothing?

Why is it important to challenge whether our interventions are the cause of moving performance in the right direction?

True performance measurement and management, is about sustaining performance at a new level, not creating short term progress that drops when we move on.

When you do something deliberately, you know you get a better outcome. Improving any aspect of business performance deliberately means measuring that performance so we can make evidence-based decisions on exactly how to improve it.

– STACEY BARR, FOUNDER OF THE PUMP PERFORMANCE MEASUREMENT BLUEPRINT WORKSHOP

Yet when we see a positive movement in our measures we automatically believe we are the cause. And why not? Usually we are investing energy in making the change that give us a step-change in performance. But if we are to be truly evidence-based, then we check our successes as well as our failures.

How to check if your KPIs are really delivering what you need

Tip 1: Design the right KPI

Designing meaningful measures/KPIs is about finding and choosing the most feasible and relevant measures that are clearly linked to the observable evidence you would notice when strategic results are being achieved. Good measure design is done by:

1. Having a clear strategic result with no vague/’weasel’ words
2. Stating the observable evidence that you would notice if we were achieving the result
3. Quantifying evidence so the measure gives direct feedback of your progress in achieving the result

Question: Are you witnessing the observable evidence that suggests  what you are doing is directly correlated to how your measure is moving?  

Tip 2: Measure your performance as a trend over time 

To understand where interventions have made an impact you need to have a degree of sensitivity in data to pinpoint it. So often we see performance improvement based on quarterly surveys or qualitative measures. These make it almost impossible to be certain where the change occurred, to understand it and to learn from it. If you want to be evidence-based, present data in a way that allows you to interpret it:

1. Collect data frequently so you are able to pinpoint change – anything over monthly can create uncertainty!
2. Present data so you can see the trend over time and understand the context of performance.
3. Use control graphs that differentiate between statistical significance and natural data variation.

Tip 3: Measure both sides of the change

So many organisations rely solely on after-the-event measures where it is too late to change performance – referred to as lag measures. Lead measures are what give confidence that what you are doing is moving you in the right direction so you can achieve that eventual lag result. For example:

1. Example lead indicator: sales revenue on its own it tells us that we have made more money, but the improvement in marketing measures and business development impact (lead measures) are what give us assurance it is a holistic improvement.

2. Example lag indicator. the number of Gold medals won at the Olympics – an ‘after event’ result. BUT you need lead measures to indicate that you are moving in the right direction before the event to win Gold medals.

If both of these indicators exist, it suggests that a shift in performance is directly correlated to the work you’ve done.

Summary

If you follow the above steps, you should be able to say with confidence and honesty that:

1. Our improvement is a direct consequence of our improvement.
2. We believe that improvement is sustainable.