It often seems like we are obsessed with measurements. Hospitals, schools, and businesses collect all sorts of data. From birth to when we shuffle off this mortal coil, it seems someone is always looking over our shoulder, recording something about us.
There is a widely held belief that you need to measure to manage. While you can usually find a way to influence something that is directly measurable, it may not be feasible to accurately measure something that is manageable. If you measurements aren’t well thought out, measuring might merely be delivering an illusion of control.
So I guess it shouldn’t be surprising that KPIs and performance measures can be a source of angst for many large organisations. Especially as they usually determine executive income, as I have discussed on other occasions.
Shareholders usually measure corporate performance based on financial market measures, such as earnings per share and return on equity. Boards typically set KPIs relating to those financial market measures and compliance related issues. Unfortunately, these top down KPIs might have little direct applicability to the daily operations of an organisation. This leaves executive leaders with a tricky balancing act, as operational activities need to be mapped to financial KPIs.
These days most enterprise workflows are handled electronically, making the “bean counting” aspects of business rather effortless. This inevitably leads to an explosion of reports and benchmarks, and the proliferation of bottom up KPIs. Not surprising perhaps, many of these bottom up KPIs end up being entirely disconnected from top down KPIs and the strategies of the leadership team.
To further complicate matters, the further you drill down into the managerial layers of an organisation, the more likely a top down KPI will be turned into a “group target”. Bottom up KPIs on the other hand are usually based on something that is easily measured, and tailored to the operational performance of individuals or small teams.
So you can easily end up in a situation where accountability disappears, as top down KPIs are translated into group targets – allowing poor performers to hide behind the group number. Bottom up KPIs can also have accountability problems, as their use in performance management can be “gamed” by staff lobbying their managers to move the goal posts.
Unlike corporate situations, government organisations have different stakeholder expectations. Top down KPIs which focus on operational deliverables, budget adherence and expense control are commonplace. Transparency requirements and pressure from external sources make it likely that some bottom up KPIs will bubble up to the highest levels of the organisation.
The Productivity Commission produces regular reports into government service delivery across healthcare, education, and other key areas. They provide a good snapshot into how some complex government activities are measured and reported.
One of the most controversial set of numbers that the government measures is NAPLAN, the National Assessment Program – Literacy and Numeracy. The complexity and cost involved in the NAPLAN measurement process is a testament to the workforce difficulties caused by shining light onto the coalface of services delivery.
As you might expect, many lobbyists and employees oppose NAPLAN measurements being reported. The rallying point for internal dissent is the fear of how the information will be used by management and stakeholders, and the loss of context when comparisons and decisions are made. Undoubtedly there will be many more years of vocal lobbying and dissent, as Prime Minister Gillard has just announced that high performing teachers will receive bonuses partly determined by data collected in the NAPLAN process.
I think it is worth considering how every KPI you measure maps into your top level goals, and who precisely will be held accountable. If there is no real accountability, then you are probably wasting your time.