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Software // Information Management
Commentary
2/3/2005
11:50 AM
Ted Kemp
Ted Kemp
Commentary
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Politics-Free KPIs

Quiz: Name a non-IT issue that impedes performance management. Answer: Managerial politics.

Some people believe executive participation is the most important factor in a performance management initiative's success. Those people are right. But that's also what makes performance management such a headache. When executives and business managers lead, politics inevitably follow.

Business performance management involves setting long-term strategic goals, and then tracking how closely the organization is executing the steps that will bring about attainment of those goals. Performance management is about steering the business along the poorly marked trail to success.

The map that helps companies stay on track, if there is one, is made of key performance indicators, or KPIs. A KPI is a metric that provides a direct measure of how well a company is meeting its strategic goals. For example, "How many new customers are we winning through our direct mail campaigns?" or "How many seconds is our warehouse management software shaving off ship times?"

KPI development, then, is absolutely critical before a performance management initiative begins. But like many components of business intelligence, KPI development is not primarily an IT issue. First and foremost, it's a business issue, one that requires the input of high-level executives from several departments.

And therein lies the rub. By the very nature of who's involved, KPI development can become hopelessly entwined with company politics. After you gather your KPI design team, it won't take business managers long to realize they're formulating the very gauges by which they'll be labeled as either successes or failures. As BPM Partners CEO Craig Schiff writes in an Intelligent Enterprise story about metrics development we ran earlier this winter, "The people in the room may ultimately be judged (and potentially compensated) on how they perform against the measures the team is selecting."

But there is a way around the problem: Finding a moderator. Ideally, the CEO or principal of a business possesses the impartiality to effectively officiate the design of KPIs. That way, line-of-business managers stay focused on success for the business instead of worrying about their own reputation or workload. Another nice thing about in-house moderators is that, unlike outside consultants, they don't cost anything.

Other times -- perhaps most of the time -- CEOs and other high-level operations executives aren't available to oversee KPI meetings. They're just too busy. In those cases, it's helpful to have a neutral, disinterested party who can guide KPI sessions.

So who can play that role? Independent business performance management consultants can assist with KPI design, moderate the process and report back to top executives, reassuring them that the process remains strategically focused. Some KPIs will very tangibly impact people's livelihoods, says BPM Partners vice president John Colbert. Managers will have to hit these metrics. It's the consultant's job to ensure that managers don't design KPIs that maximize their personal return, or benefit their department over some other department.

"If the chief executive can't do that, you need someone who can be the tie-breaker," Colbert says.

In order for KPI generation to succeed -- and, therefore, for performance management initiatives to succeed -- politics have to be removed from the process as much as humanly possible. If your organization has failed at building politics-free KPIs, try bringing in a referee.

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