When KPIs are done right, it’s rare and beautiful thing. Mostly they’re like action-disaster movies, except without the Michael Bay explosions.
At some point, every small business realizes that the only way to be sure things are going well is to start measuring. What gets measured gets managed, right?
Unfortunately, most small business owners don’t have the time or skill set to figure out Key Performance Indicators. They’re understandably busy with, you know, business! So they hire consultants. The consultant tosses out dozens of data points that may or may not be useful (or even applicable to the business). Through a mystical process involving somebody being overpaid, KPIs are set.
In this situation, KPIs are not determined by people who actually understand the organization so there are nearly always unhappy consequences for the business.
Here’s a real-life example of how it works.
Let’s say you’ve been walking or running for the past few months to get in shape for summer, and you started to experience some knee pain. You went to your doctor, who shook your hand while giving the nurse instructions about his last patient, spent a moment poking at your knee and determined there’s no significant damage. He looked at your chart for the only KPI he’s interested in – your weight – and gave you his expert opinion: you need to lose a few pounds to take the stress off the joint. Thanks for your copay, goodbye.
Did that give you anything useful? No! You already knew you needed to lose some weight – that’s why you were jogging in the first place. What happened was, you just paid for an expert to tell you what you already knew. It wasn’t helpful because that person didn’t listen and didn’t help you understand whether there’s a problem, what caused it, or how to fix it.
KPIs can be problematic at the best of times, and they’re especially ugly when you force by-the-book or a boxed set of measures to scale to your business. It nearly always comes down to stress-filled chaos, trying to decide whether quality or quantity is more important.
Most consultant-designed KPIs have some connection to vanity – they make somebody look good when the quarterly numbers come in. In the short-term, it’s great. Kinda like the first day of a crash diet is great. The effect is temporary but the boss is happy, the consultant gets paid, and life is good. For today. But tomorrow….
While KPIs may be a time-consuming challenge, you can handle them. The trick is to figure out what’s most important to your business, in terms of values, assets (don’t forget human capital), and your organizational definition of success. That information is where an effective KPI begins.