Most organizations have weak corporate Key Performance Indicators (KPIs). They rarely align to strategy, give evidence of impact, or offer actionable feedback. If they can’t do these things, they can’t really be called “corporate” KPIs.
Corporate KPIs are the performance measures that the senior leadership team uses to steer the organization into the future because they describe what matters most and are critical to successfully executing the strategy.
However, excellent corporate KPIs are hard to design. Many organizations find the financial goals and financial KPIs easy enough; but, the non-financial goals and KPIs are, too often, meaningless. They lack certain qualities that excellent corporate KPIs need, and it is a question that comes up all the time. “What makes an excellent corporate KPI?” Here are five qualities to build into yours:
Quality #1 – Excellent corporate KPIs are attached to a corporate goal.
When a KPI or performance measure is attached to a corporate goal, we call that ‘KPI alignment’. It means that there isn’t just a list of corporate KPIs, there is a one-to-one relationship between each KPI and each strategic goal.
For example, an energy and water authority has four specific goals, two of which are:
- “Provide leadership for the energy and water supply sectors”
- “Improve outcomes for stakeholders and customers”
They have a list of KPIs, but they don’t visually (in the layout of their plan) or logically align the KPIs to their goals. One KPI is “Stakeholder regulatory compliance”, which might align to one of the above goals, but it would be poor evidence of either – and none of the KPIs align at all with the other two goals they have.
To improve the quality of the corporate KPI, the layout of a strategic plan must make it clear which KPIs are aligned to which goals.
Quality #2 – Excellent corporate KPIs are direct evidence of the corporate goal.
It’s easy to list a bunch of KPIs that you already measure, that you already have data for, that other similar organizations are measuring. However, if you want excellent corporate KPIs, none of these are sufficient for ensuring your KPIs actually give real evidence of your organization’s specific goals.
For example, an education department has a goal to “support the early development of children to provide them with the best possible start in life, so they begin school ready to learn”. The KPI for this goal is “Proportion of children enrolled in preschool the year before full time schooling for 600 hours per year”. However, how is enrolment in preschool evidence of how ready a child is to learn in school?
In contrast, an organ and tissue donation authority has a goal to “Improve organ and tissue donor conversion rates” and you can see how their measure of “Conversion rate – Number of actual donors as a percentage of all potential organ donors” is direct evidence of that goal. This kind of precision will lead to better corporate KPIs.
Quality #3 – Excellent corporate KPIs are quantitative.
Yeah, yeah, I hear you: “Not everything is quantitative” – but actually, it can be. Paraphrasing Douglas Hubbard, author of “How to Measure Anything”, If you can observe or detect a difference, then you can measure it. If you can’t observe or detect a difference, why would you set a goal for it?
For example, a national sporting association has a goal of “Corporate leadership and unity”, and they measure this goal with KPIs like “Leading by example as a National Organization” and “High level compliance to governance assessment completed”. These are not performance measures! KPIs measure results, and measuring means some degree of quantification. These KPIs read more like actions. Actions and performance measures are not the same thing.
To make their goal measurable (and of higher quality), the sporting association would need to be more specific about the meaning of their goal. In particular, what difference is this goal trying to make or achieve?
Quality #4 – Excellent corporate KPIs can be monitored over time.
A KPI is for steering, not judging. So, it’s of little use when it only tells you whether or not you achieved the goal (which is way in the future from when you started your improvement). Excellent corporate KPIs can tell you to what degree you are making a difference, in real time – so you have the feedback to correct your course, as needed.
Measures that can’t be monitored over time are usually not real measures. For example, a university has a strategic goal named “Educational excellence”. The KPI is ”Full introduction of the Scientia Educational Experience with effective integration of online learning.” This KPI not a real performance measure; it’s a milestone. How would the university get feedback about how “ the excellence” of their education is improving overtime from their proposed measure when it is just about getting something done? Milestone measures are project measures, and don’t provide information on whether these actions are having any impact on “excellence”?
Quality #5 – Excellent corporate KPIs are strategic in nature, not operational.
A KPI is strategic when it measures a change the organization is trying to make, which only the senior leadership team can be responsible for. It is proactive, future-oriented, and about improving how it fulfills its mission and reaches for its vision.
A KPI is operational when it measures a result produced by a division of the organization, such as a business process or function. It still is about improving performance. but it’s a KPI that measures a change that a team within the organization can be responsible for.
The idea is that operational KPIs are the drivers (causes) of the strategic or corporate KPIs, but, take note, they are not evidence of the strategic or corporate goals!
For example, the KPI from the energy and water authority mentioned above was “Stakeholder regulatory compliance.” In most cases, compliance is never a strategic result. It’s a hygiene factor, particularly for an industry that has been regulated as long as this one.
Using operational KPIs as strategic ones is a flaw that many corporate KPIs have. They measure operational results that might have a causal effect on the strategic goal, but still are not evidence of whether the organization is making progress towards the corporate goal or not.
How excellent are your organization’s corporate KPIs? Download this template, and do a quick assessment
The PuMP® Performance Measure Blueprint was created by Australia’s performance measure specialist Stacey Barr. Louise Watson of Adura Strategy is Canada’s Official Partner and Licensed PuMP® Blueprint consultant. This blog was adapted from an original article written on Stacey Barr’s website. Read the original article here.
