10 Characteristics of Effective Performance Metrics

Most businesses understand the value of using metrics to assess the state of their company and validate the company is heading in the right direction. Organizational metrics, sometimes called Key Performance Indicators (KPI), are developed to understand the overall health of an organization. They provide the fundamental element of balanced scorecards and dashboards, which are used to quickly show how well the organization is performing relative to the past, a target, or both. 

Traditional KPI are established within four broad categories: 

Customer. Customers generally consider four broad categories in evaluating a supplier: Quality, Timeliness, Performance and Service, and Value. Customer communication methods are the means to understand the relative importance the customer base places on these categories as well as their general expectations. 

Internal process. These metrics that are strongly aligned with the strategic objectives are best suited. Total cycle time (i.e., time to process the order) and first-pass quality are relevant indicators of internal process performance. Process cycle efficiency, calculated as the value-added time divided by the total lead time, or Overall Equipment Effectiveness (OEE) are relevant Lean-focused metrics for evaluating internal performance and resource utilization. 

Learning and growth. Metrics in this category might focus on the total deliverables (in dollars saved) from continuous improvement projects, new product or service development times, improvement in employee perspective or quality culture, revenue or market share associated with new product, and so on. 

Financial. Many suitable financial metrics are available and widely tracked, including revenue, profitability, market share, and so on. Cost of quality is also recommended. 

The choice of metric is important only so far as the metric is used to guide behavior or establish strategy. Poorly chosen metrics may lead to the suboptimal behavior if they lead people away from the organization's goals instead of towards them. 

To be effective and reliable, the metrics we choose to use need to have ten key characteristics. The following table was adapted from Keebler (1999) which suggest the qualities to look for in indicators. 

A good measure:	Description:
Is quantitative	The measure can be expressed as an objective value
Is easy to understand	The measure conveys at a glance what it is measuring, and how it is derived
Encourages appropriate behavior	The measure is balanced to reward productive behavior and discourage “game playing”
Is visible	The effects of the measure are readily apparent to all involved in the process being measured
Is defined and mutually understood	The measure has been defined by and/or agreed to by all key process participants (internally and externally)
Encompasses both outputs and inputs	The measure integrates factors from all aspects of the process measured
Measures only what is important	The measure focuses on a key performance indicator that is of real value to managing the process
Is multidimensional	The measure is properly balanced between utilization, productivity, and performance, and shows the trade-offs
Uses economies of effort	The benefits of the measure outweigh the costs of collection and analysis
Facilitates trust	The measure validates the participation among the various parties

Creating KPIs forces your organization to clearly define the performance measures that outline how you’ll achieve your big strategic priorities. 

Remember the following: 

1) Define Your Measure – This sounds obvious, but every KPI must have a clear expression of what you need to measure. The more descriptive your performance measure, the better.  You can categorize performance measures into these categories: 

• Activity Measures –This measures activity and can include a percentage, number, currency and activities, or processes. An example of this measure would be the number of leads in your pipeline. 
• Outcome Measure – This measures progress against a defined outcome, often expressed as a percentage increase, change, or results from an outcome. An example of this would be % increase in revenue compared to last year. 
• Project Measure – This measures the progress of a project, often expressed as percent complete, a deliverable, activity, or process the owner can influence. An example would be % complete to complete XX strategic project. 
• Target Structure – These represent a numeric result against a date. A perfect example would be $XXXM in revenue by the end date of a strategic objective. 

2) Define Your Target – Your target is the numeric value you’re setting out to achieve. Targets need to match your measurement type and due date. If your measure is a percentage, your target needs to be a percentage. If your measure is a raw number, the target should be a raw number. 

3) Outline the Data Source – Every KPI needs to have a clear data source. Make sure you articulate where you are pulling your data from and what the calculations are so everyone is on the same page. 

4) Define an Owner and Tracking Frequency – As with any SMART goal, a KPI needs to have a clear owner and defined tracking frequency. So, make sure someone is accountable for pulling the data and updating performance on a defined frequency.  

Once chosen, the metrics must be communicated to the members of the organization. To be useful, the employees must be able to influence the metric through his or her performance, and it must be clear precisely how the employee’s performance influences the metric. 

Regardless of the metrics you use or your method for tracking, make sure to educate your organization on how the metrics are derived, what they indicate, and how they will be used in addition to regularly communicate relevant metrics to your team members. 

Lean Quote: Don’t Fly Blind, Collect the Right Metrics

On Fridays I will post a Lean related Quote. Throughout our lifetimes many people touch our lives and leave us with words of wisdom. These can both be a source of new learning and also a point to pause and reflect upon lessons we have learned. Within Lean active learning is an important aspect on this journey because without learning we can not improve.

"If you don’t collect any metrics, you’re flying blind. If you collect and focus on too many, they may be obstructing your field of view."   —  Scott M. Graffius, Agile Scrum: Your Quick Start Guide with Step-by-Step Instructions

One of the biggest metrics mistakes is random selection. It is not enough to simply create a numeric measure. The best metrics start with the big picture. The measure should accurately reflect the organization’s vision. We use metrics to base decisions on and to focus our actions. It is not only important to measure the right indicators, it is important to measure them well.

Selecting Key Performance Indicators can be downright hard. As an evaluation to see if you got your right KPIs, here’s a quick punch list you can use to pressure test your list of KPIs to make sure they’re strategic:

• They provide a way to see if your strategy is working.

• They focus our staff’s attention on what matters most for success.

• They provide a common language and understanding for communicating our performance.

• They are valid and realistic, helping ensure we’re measuring the right things.

• They are verifiable and ensure accurate data.

• They clearly express the result of outcome of achieving the objective.

Too many metrics create chaos and unnecessary work. Too few metrics will not provide enough measurement to ensure you’re your strategies are supported. Your metrics should provide insights into the progress your agency is making.

Although there may never be a single perfect measure, it is certainly possible to create a measure or even multiple measures which reflect the performance of your system. If the metrics are chosen carefully, then, in the process of achieving their metrics, managers and employees will make the right decisions and take the right actions that enable the organization to maximize its performance.

4 Ways To Build Trust During Times of Change

Trust is essential in a team, especially in times of change. People commonly resist change for a variety of reasons.  Although you intend for the change to result in a positive outcome, change is often viewed as negative.

If the people in an organization don’t trust their leaders, they won’t buy-in to the change. They will question their motives, drag their feet, or actively work against the change. Trust is key to both managing and leading change. We cannot afford to take trust for granted.

Trust is needed in every aspect of performance in an organization and affects many aspects ranging from increased productivity, efficient management, job satisfaction, employee engagement and staff development. However, when there is organizational change trust becomes the most important aspect of a company to ensure the change succeeds.

To build trust in times of change, consider these three steps:

1. Overcommunicate the outcome.

There’s no such thing as communicating too much in times of change. For communication that builds trust, paint a picture of the outcome. Instead of endlessly tweaking the messaging, focus on providing clear and succinct communication about what is being done, why it’s being done that way and what the results should look like.

2. Focus on the work and build small wins.

The point of overcommunicating is to ensure that employees know what is happening and why, even if they haven’t fully bought into the change itself. But there has to be a balance between communication and actually doing the work. People will put real trust in the plan when they see the wins coming from putting the change into action.

Your read on the situation will determine the timeline. Once you gain some initial buy-in, focus on what people need to do right now to see those small wins start to build up. Employees seeing the benefits for themselves will translate into increased trust in the process—and in the executive team.

3. Be a role model

Building trust takes time. It’s not something you earn in a week, and certainly not in the period of crisis. You have to think about a pivotal point in your company long before it’s even on the horizon, and the best way to gain employees’ trust is by making it a part of the company culture. Treat your team members like you want to be treated and show them a model of behavior in difficult situations that they could copy. At the same time, be transparent and super honest at all times. If things go wrong, look for the solution first, not for the one who messed it up.

4. Seek feedback from frontline employees.

Change strategies are built with input from a lot of people: executives, the board, outside consultants. But often, you have to put the plan into action to find the gaps in it. At this point, the people closest to the work will be able to provide the most actionable insights. Listening to their feedback and adapting the process will further build trust in your leadership and buy-in to the change.

You build and maintain trusting relationships and a culture of trust in your workplace one step at a time through every action you take and every interaction you have with your coworkers and employees. Trust may be fragile, but it has the capacity to grow strong over time with the deliberate efforts above.

Without trust in the workplace, communication and teamwork will erode. Additionally, morale will decrease while turnover will rise. However, by using these strategies, you can build your employees’ trust in management, thereby making their workplace an environment filled with innovation, creativity and ultimately higher profits for all.

7 Pitfalls to Avoid When Selection the Right Metrics

Choosing the right metrics is critical to success, but the road to good metrics is fraught with pitfalls. As your endeavors to become more metrics-driven, beware of errors in the design and use of metrics.

Here I compile the most common mistakes that teams are committing when using metrics, so you’ll know what not to do when adopting them.

1. Metrics for the sake of metrics (not aligned)

KPIs are only useful if they are aligned to your strategy and inform strategic decision making. Anything else is just window dressing. When KPIs are not linked to your strategy, you’re wasting huge amounts of time and money collecting information that is not going to benefit the business. KPIs are useful if they deliver mission-critical information that is relevant to your business.

2. Too many metrics (no action)

A common belief is that if you capture every type of metric, it will tell you magically what works and what doesn’t. Unfortunately, that is not how we get to insights, and would be comparable to having to find a needle in a haystack.

Too many metrics may be worse than no metrics. They require large amounts of resources to track and produce reams data that call for substantial time and effort to analyze. A large amount of data can create the impression of knowledge but is useless if it doesn’t lead meaningful insights and actionable recommendations.

3. Metrics not driving the intended action

If you collect metrics, you need to use them somehow. Therefore, one of the most common mistakes is doing nothing about the metrics you are seeing. Metrics can give you process improvement insights and, to react, you need to understand how they work and what they mean.

4. Lack of follow-up

Your KPIs are your window into understanding how various parts of the business are doing — your health metrics. When these areas aren’t progressing as intended, it’s crucial to take timely action to ensure your business stays on the right track.

5. No record of methodology

Companies that generate metrics reports also should have a robust metrics analysis framework or record of methodology. Without a statistical framework for measuring, analyzing and improving process performance, the value of metrics diminishes. Metrics and reports are a means to an end, not the end themselves. They should be analyzed to assess process stability and capability, and to trigger process improvements efforts.

6. No benchmark (unrealistic targets)

Many organizations set targets without any thought to current performance, process stability or process capability. Industry benchmarks are helpful, but before applying these benchmarks to an organization, the team should analyze current process performance to ensure that unrealistic targets are not set. Unrealistic targets create resistance within an organization and impact team and people performance. In some cases, they also lead to data manipulation or incorrect reporting.

7. Underestimation of the data extraction (and data quality)

A common pitfall is to underestimate the importance of data quality. Working with bad entry data is pointless: no magic formula or algorithm can reverse it. And you will be measuring something wrong.

You need to identify good sources of data. I always recommend working hand in hand with IT. This way, they will know your needs better and you will understand your company’s data management (governance, architecture, databases, master data etc.)

A well-designed set of KPIs should provide a clear indication of current levels of performance and help your people make better decisions that bring the business closer to achieving its strategic objectives. By avoiding these 7 pitfalls, you can ensure your KPIs are designed, implemented and used exactly as they were intended – to help your company succeed.

Lean Quote: 7 Traits of a Leader

On Fridays I will post a Lean related Quote. Throughout our lifetimes many people touch our lives and leave us with words of wisdom. These can both be a source of new learning and also a point to pause and reflect upon lessons we have learned. Within Lean active learning is an important aspect on this journey because without learning we can not improve.

"You don't need a title to be a leader."   —  Mark Sanborn

Anyone can be a leader by doing their best and setting a good example. Leaders believe in themselves, their vision, and their ability. They do what is necessary to seek out greatness in themselves and others. Here are some more key traits of top leaders:

They Are Self-Motivated.

Leaders not only know how to drive others to succeed; they also know how to drive themselves to get things done so that they may become successful as well. 

Setting definite goals helps leaders stay motivated at all times. The motivation a leader has can directly impact and inspire their team. 

They Have a Positive Attitude.

Great leaders overflow with an abundance of positivity. The positive disposition they have is contagious and helps to inspire a positive mindset in others. 

They Are Emotionally Stable. 

Stress and frustration are common things that come with leadership positions. Good leaders cannot allow themselves to let their emotions knock them off track.

Instead, they must have strong and stable emotions so they can continue on, even in difficult circumstances. 

They Exude Self-Confidence.

People are more likely to believe in you if you believe in yourself. This is why it is essential for leaders to have self-confidence that shines through.

Only someone who exudes self-confidence can influence others and earn their respect. 

They Are Decisive.

Leaders often have to make decisions. Some of the decisions may be difficult and require a great deal of critical thinking.

They know how to make decisions, and they stick to their decisions because they are confident enough to believe they made the right choice. 

They Are Accountable and Responsible.

Playing the blame game isn't something that true leaders do. Rather they take responsibility for their actions, tasks, and the results they get. 

If a mistake is made, they remain accountable and admit their faults readily with little prodding from outside sources. 

They Are Passionate.

Passion is made up of expression, energy, and activity. Passion plays a part in the drive and zeal a leader has.

Good leaders are excited about what they are doing, and they express that passion in front of others. 

Lean Tips Edition #191 (#3076 - #3090)

For my Facebook fans you already know about this great feature. But for those of you that are not connected to A Lean Journey on Facebook or Twitter I post daily a feature I call Lean Tips.  It is meant to be advice, things I learned from experience, and some knowledge tidbits about Lean to help you along your journey.  Another great reason to like A Lean Journey on Facebook.

Click this link for A Lean Journey's Facebook Page Notes Feed.

Here is the next addition of tips from the Facebook page:

Lean Tip #3076 – Identify Bottlenecks, Roadblocks, and Issues.

To produce meaningful results, you need to identify what’s holding your process back. What’s going well or not? How can you improve it? Maybe one person’s task is overly time-consuming or a step is unclear, constantly prompting questions. Maybe the process is too dependent on other processes or people.

When identifying roadblocks, it helps to have data associated with the process for analysis. Tracking data points like time, output, and ROI will help you figure out if the improvements you make are effective. The amount of data you need depends; some processes (like our RFP process) might only require a month or so of data, but embarking on an overhaul of a citywide passport request process, for instance, would benefit from a year’s worth of data.

Lean Tip #3077 – Find Ways to Resolve the Issues.

Technology—in particular, automation tools—can often help solve efficiency problems. Automation may already be embedded in the tools you use regularly, you just might not be taking advantage of it. So look closely at the tools you’re using and see how you can use them better; or, if the situation warrants it, consider making a bigger investment into a software tool that includes automation and would be helpful in eliminating unnecessary manual work for your team. 

Lean Tip #3078 – Share & Continue to Refine Your Process.

When your process is formalized, document and share it with the team. But just because you’ve reached the end of these process improvement steps doesn’t mean you should stop looking for ways to improve further! Monitor its ongoing performance and continue to refine as you hear more feedback from team members. Over time, there may also be changes surrounding the process that might affect the overall flow, and require additional fine-tuning.

Lean Tip #3079 – Find the Pain Points in the Process

To discover where improvement is needed, look for signs where the current process is failing. Identify the location of bottlenecks and where multiple steps are required to complete just a portion of a procedure. A clear sign of a process pain point is at the stage where customers or employees are becoming frustrated with the workflow. Find the areas where work needs to be regularly redone, or it’s being repeated by different people. This duplication of effort is a waste of time and resources, so you’ll want to find a way to eliminate it.

Lean Tip #3080 – Obtain Stakeholder Buy-in Buy Explaining the Rationale for Change

People are naturally resistant to change, even if it’s for the better. That’s why you must explain the reasons behind the process improvements to obtain buy-in. Moreover, by detailing how the changes will deliver value, such as a better customer experience, stakeholders become motivated to help you.

Lean Tip #3081 – Document Your Current Processes

A wise mentor of mine once said, “You can’t automate what you haven’t defined.” More broadly we can apply that same piece of wisdom to process improvement. When we look at our breadth of offerings and our own processes, we may know in our heads what we mean, and what the ideal process is, but if we don’t write down or document our as-is processes, we lose our ability to experiment in changing them.

By defining our current processes, we can then start discussions from an informed place. Documentation comes in all shapes and sizes. You can make process maps, knowledge articles, scripts, storyboards, customer journey maps, a service catalog and service definitions, or any combination of these.

Lean Tip #3082 – Troubleshoot in Real Time

One of the most useful concepts that continuous improvement borrows from Kaizen is the encouragement to confront problems head-on in an effort to solve it faster. If an issue becomes apparent fix it immediately instead of searching for the “perfect” solution.

Waiting will inevitably cost time and valuable resources. Instead, on-the-spot troubleshooting allows production to continue while the new, improvised solution can be analyzed using continuous improvement techniques. You might find that what was first a temporary fix could lead to permanent positive changes.

Lean Tip #3083 – Encourage Leadership to be Open Minded

Continuous improvement works especially well when individuals are encouraged by senior leaders. Prepare your leadership team by offering special training to encourage new ideas and removing any blockers that may be in a team member's path as they are trying to improve a workflow.

One of the hardest parts of using the continuous improvement model is the desire to strive toward perfection. This is an impossible feat, and the philosophy behind kaizen is to make small changes to be better than you were the day before. Focusing on perfection can lead your team to make changes that aren’t actually necessary.

Lean Tip #3084 – Foster Discovery and Curiosity

Continuous improvement empowers every team member to take ownership of their processes. When your company culture encourages team members to improve business processes in a way that works best for them, it encourages more discovery and curiosity within the entire company. This enables individuals to experiment without the fear of breaking processes or being judged for failure. If something doesn't work, things can just revert back to what they were previously.

Lean Tip #3085 – Keep on Keepin’ On

The part of continual process improvement that can feel overwhelming is the continuous aspect. With continuous improvement there is no perfection, and there is no end, but one of the first rules of project management is that every good project should have a start and end date. Where process improvement differs is that there is likely to always be more we can do, and things we can change. Don’t get defeated by this, but see it as a chance to break up the monotony, and keep innovating.

One thing that makes this easier is that there will always be new technology, solutions, software, or cultural changes that enable us to rethink how we do things. This can keep things exciting. The biggest difference with process improvement from your typical project is that there will always be something new for us to consider. If we ignore this, we run the risk of stagnating or falling behind.

Lean Tip #3086 - Start Small.  If Everything is a Priority, Nothing is a Priority

As you delve into a problem, there are many paths for improvement that will open up to explore.  It’s very easy to get distracted from what you set out to accomplish when you start to see all of the potential opportunities for intervention and improvement. It’s imperative to keep your goal front and center and continue to ground yourself in what you are trying to accomplish.

To achieve sustainable, meaningful improvements, rigor (being thorough and accurate) to the process must be maintained. What seems at the surface level to be an “easy fix” requires a thoughtful establishment of the new way of doing things for improvement to truly take hold.

Lean Tip #3087 – Acknowledge Past Achievements

In most businesses, improvement initiatives are not really brand new out of the box thinking, as many people have already been exposed to and worked on improvement concepts for a long time, and with some successes. It’ s important to acknowledge past achievements and recognize the champions who made it happen by assigning them significant roles for the new wave. If however, the approach has been firefighting, you may want to build a different team and approach the initiative more proactively. If past projects were not successful then it’s important to show how the new initiative differs from the previous and why it stands a better chance for success.

Lean Tip #3088 - Involve and Work Through People

Avoid being prescriptive with each step of your approach, rather opting to use a facilitated approach to get support and buy in from the teams involved. Always be open to a team using a different approach though still aligned to the overall objectives. Forcing things down people’s throats doesn’t really work well. Good facilitation should allow for a team to reach a pre-conceived conclusion on their own accord. On the same vein, allow the teams to decide what tasks and actions are to be done and offer to help rather than allocate tasks directly to the different people.

Lean Tip #3089 - What Gets Measured Gets Managed.

Put in place a good monitoring system to track the number of ideas generated over time, the level participation of people at any one time and cumulatively during the process, the rate of implementation and the Return on Investment or benefits. Tracking and showing a direct correlation between efforts and benefits is the best way to sustain improvement. Use agreed targets and KPI’s as your “dipstick” check.

Lean Tip #3090 - Keep Everyone Informed of Progress and Results.

The success of a good improvement program depends on good feedback and communication surrounding progress. Reports on progress can take many forms, as long as relevant and timely information is communicated. It’s also important to publicly celebrate any success coming out of the program. Lastly, where new records have been set and old improvement targets “smashed”, set new targets and make them known.