Thursday 13 August 2009

(12) KPIs, People and Motivation

Businesses are about people. Motivating them in the right direction is key. How can KPIs help? How should KPIs be determined?

In article 2, it was clear that KPIs need to be “goal congruent” with the business's strategic goals. This is to ensure decisions and actions that affect a KPI contribute towards those strategic goals.

This means that for individual directors and managers, their KPIs should tie in closely with their personal goals, which tie into the strategic goals. Their personal goals and associated KPIs can be part of the appraisal system.

Assuming the personal goals have been established:
    • What are each person’s goals?
    • What are the KPIs that measure their results (the Key
       Results Metrics, KRMs)?
    • In addition, what are the KPIs that monitor what is driving those
       results (the Key Performance Drivers, KPDs)?

There is then the matter of motivation. Experience shows that this is always stronger if the director or manager has been actively involved in determining the KPIs that will be used to monitor their performance. They also know what they need to drive and run their area of the business successfully.

To determine a set of KPIs, the process is therefore broadly:
1. Understand the business, its strategic objectives and overall
     business process
2. Establish what’s important to achieve these objectives (Critical
     Success Factors)
3. Discuss with the Chief Executive, directors and relevant managers:
    • Their goals
    • The KRMs that measure those goals
    • The KRDs that measure activity in pursuit of those goals
    • Other key management information required
4. Review, amend and agree the KPI set from organisational and
     individual perspectives
5. Establish how KPIs and other information will be presented to
     these people, typically using a Business Intelligence tool
6. Configure and implement the system

The process is best done by someone independent of the organisation
    • to collate information from a neutral perspective
    • to use their experience to identify omissions and
       challenge what’s really important
    • to provide a suitable system with the right information on a
       timely basis

As the business and the people within it change, it is useful to periodically repeat the exercise to ensure all the right KPIs are in place, and the current management team is suitably motivated.

The overall result is then the provision of a set of KPIs that monitors and drives all that is important within the organisation to achieve strategic goals.

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