Some KPIs are stupid. Sorry ““ but it’s true. Mark Smith for one is sick of it, and in this post from Information Management he explains just what he means by “Stupid KPIs” and how you can help your organization escape them to gain true insight and value. His first point is that very few people who are using KPIs actually know what they are. Smith believes that the use of the KPI has been “dumbed down” so much that the value of them has all but disappeared. They have been misrepresented to a point where simple metrics are confused for KPIs, and vice versa.
A “dumb” KPI, is, in Smith’s definition, are measurements that don’t show a comparison. For example, revenue or sales is not a KPI ““ it’s a metric. This is a problem because it’s causing more work than less work. As Smith states, it’s the underlying metrics that give KPIs the ability to reduce the time of communicating what issues are developing or present. To help get his point across, he suggests dropping the P ““ just think of KPIs as “Key Indicators”: what key indicators are important to each roll in the organization, and are those roles able to tap that information to gain insight into performance and how that performance supports overall business goals.
Smith goes on to provide a suggestion of how to fix the problem organizations now face:
To erase the stupidity in how KPIs are spoken about, demonstrated and actually deployed, we need to advance our dialogue and educational discussion of what key indicators and range of metrics are required to support particular deployments. I have already said that just placing more charts in a dashboard, no matter how pretty and interactive they might be, will not help support the actions and decisions that business analytics should enable. The effort to make KPIs more valuable begins with ensuring they are properly developed and represent performance in terms of the state of success toward achieving the goal or target. Showing past performance is insufficient without knowing how well it met expectations. Presenting a KPI does not necessarily require a chart; it can be done equally well by text presenting it within the context of how the people or process is performing over time and where it is in progress toward the expected target. These indications can be linked to additional facts with a directional arrow or other simple representations that make it easy to determine whether to take action. If your business intelligence software does not support a simpler way to communicate key indicators and metrics, maybe you have the wrong tool.
While the message is strong, it’s also true: the quality of the result depends almost completely on the quality of the measurements and the parameters set around them. If your organization isn’t willing to put the time into developing intelligent KPIs that add value rather than add confusion.