How do you find the right KPIs? It’s not with the commonly used approaches, but the right approach will be obvious in hindsight.
How do you measure that?
In the quest to find the right KPIs, this is the most asked question in performance measurement, and for good reason. Most people — no matter their role — struggle to answer this question because they try to measure goals that are intangible without first grounding them in reality. If you have a goal that is still very vague or action-oriented, it’s too soon to consider how to measure it. First, make sure the goal is measurable. This means it’s articulated as clearly and specifically as possible.
Then, to avoid ending up with another round of blunt and uninspiring KPIs, we need to stop brainstorming lists of KPIs, or force-fitting existing KPIs to our goals. Measurement is based on observable evidence. If we don’t know the evidence of our goal being achieved, how could we ever recognise if and when it’s happening? We can’t.
To take the pain out of finding or identify the right KPIs, we must follow three basic principles of measure design:
- Measures are quantifications of evidence.
- Evidence is sensory.
- The best measures balance relevance with feasibility.
Principle 1: Measures are quantifications of evidence.
We often treat measures as summaries of data, and usually data we already have or can easily get. But a measure is useless unless it gives us direct evidence of the goal we’re trying to achieve.
Staff Turnover is often used as a measure for goals about retaining or growing talent. It’s well-known, easily understood, and based on data that is readily available. But it isn’t direct evidence of whether an organisation really is retaining its most talented staff, or growing the proportion of staff that have the talent it needs. In this context, it’s not the right KPI.
The right KPI to measure our goal is based on the evidence that convinces us the goal is being achieved. If we can’t describe the evidence, we can’t quantify it.
The first principle to find the right KPIs is to shift our focus from “what is the KPI?” to “what is the evidence?”
Principle 2: Evidence is sensory.
The reason many goals feel immeasurable is that they are written in weasel words — vague terms that don’t describe anything we can actually observe or detect.
What exactly does “retaining talent” mean? What would we observe, and how and where and when would we observe it, that would convince us if talent retention was increasing or decreasing or staying the same? This is the evidence we need to build our measure from. Evidence provides the building blocks of the right KPIs.
To find the right evidence of a goal, we use sensory-specific language. This is the language of what we would see, hear, touch or detect in the real world, if our goal was achieved right now. For example, you cannot see “talent retention,” but we can see (and count) employees, who have the skills required of their roles, staying in their roles longer. When we describe our results in sensory terms, the potential measures practically reveal themselves.
The second principle to find the right KPIs is start with sensory evidence that proves the goal is achieved.
Principle 3: The best measures balance relevance with feasibility.
A perfect measure is useless if it is impossible to implement, and an easy-to-track measure is useless if it doesn’t actually point to the goal.
The right KPI or measure sits at the intersection of two criteria:
- Direct evidence: How strongly does this measure actually correlate with the result of achieving the goal?
- Feasible implementation: Do we have the data for this measure, or is it worth the effort to get the data it needs?
The third principle to find the right KPIs is choose the measures that give us the clearest possible signal of performance while remaining practical to report and monitor regularly over time.
Try this:
By following these three principles, you move away from the frustration of “easy” KPIs that waste dashboard real-estate and decision-maker attention, and toward a system of insightful KPIs that lead to the right decisions at the right time to keep performance improving.
You could start with one goal that has no KPI, or a KPI that isn’t giving you the insight you need to achieve that goal. Then ask:
- What real-world evidence would convince you the goal was achieved?
- How could you quantify that evidence into potential measures?
- Which of these measures is the best balance of relevance and feasibility?
Perhaps you’re noticing now that the right KPIs are designed, not found?
You can dive more deeply into how to design good KPIs, here.
If the approach feels like a fit, then you can learn the detail with PuMP — we have an entire step (and template) devoted to exactly how to design the right KPIs from these principles. It might take 30 minutes or more to design the right measures for your goal with PuMP, but you save years of being led around in unproductive circles by the wrong measures.