May 26, 2010
I bet you’ve seen them – emails and ads offering you access to lists and lists of KPI’s (key performance indicators) for a price. Seems like a great deal, right? You get a ready made scorecard for your business strategy for a few bucks and little to no effort. If you are tempted to go this route ….. BEWARE!
You know how people always say that if an offer looks too good to be true it probably is? Unfortunately, in my experience, this caveat also holds for indicator libraries or inventories. What you need to know is that the majority of scorecards created by adopting "best practice" measures from an outside source result in failure. Here are just some of the reasons why this happens:
1. Just because a best practice organization and/or a lot of organizations use a specific indicator, it doesn't mean that it will provide meaningful information to your organization. Remember: measures are meaningful when they relate to the unique objectives of your business strategy, give you valid and reliable information about the performance of those objectives, and allow you to manage effectively for strategic success. When you transplant indictors and/or scorecards from one place to another you usually don't know the context in which they were used. Do the transplanted indicators relate to your strategy's objectives or not? Most organizations that adopt transplanted scorecards don't bother to answer this question by doing the required objective-indicator mapping. In the worst case scenario, they end up putting a lot of effort into collecting data that, in the end, tells them very little about the performance of their business strategy.
2. Do you collect data on these "best practice" indicators today and if not, what investment (resources, time and $$) will be required to make this data available in your organization? It always surprises me that organizations rarely factor this concern into their decision to import a set of measures from an external resource. In the majority of cases, the imported indicators are new to the organization, requiring the development of mechanisms to collect, collate, analyze, and report on the data. Required work may include the development and ongoing management of surveys, the creation of new processes and data fields in key enterprise-wide/financial systems, etc. The required effort, and associated costs, can often be substantial with no guarantee that the new measures will provide useful, actionable data and information that will assist in effective business strategy management. Before deciding to create a new measure, a full costing and ROI assessment should contribute to the discussion. Even when they are determined to be cost-effective, organizations should be wary of introducing too many new measures into their company at once as this can result in organizational capacity and change management issues.
3. Did you know that the secret to measurement acceptance and success in any organization is employee participation in the measure development/creation and selection processes? Many organizations underestimate the value of this involvement, seeing it simply as a drain on organizational resources and capacity. However, in my experience, organizations that limit employee involvement at the front end of their measurement efforts pay on the back end with employee buy in issues and resistance - often requiring investment in an extensive measurement system marketing effort that may not capture hearts and minds. Importing and adopting a scorecard from outside an organization essentially eliminates the opportunity for employees to participate in the measure creation process. When this happens, there is no investment in, and enthusiasm for, the potential of the scorecard as a valuable business strategy management tool on the part of employees. In these situations, employees see their new role related to the measurement system as just another job (with little perceived value) they must add to their already crowded workload. Not surprisingly, when employees have this attitude about measurement efforts, the scorecard fails to take root in an organization.
While just importing "best practice" indicators into your organization as a means of creating your business strategy management scorecard isn't recommended, there IS a role for "best practice" indicator lists in the measure development process.
The rule of thumb when selecting indicators for your business strategy management scorecard is to leverage existing measures that relate closely to the intent of the strategic objectives in your business strategy (NOTE: I always recommend that you begin with existing measures because experience shows that you will change 90% of the measures on your scorecard over a year of use - why invest in creating new measures that have a high probability of being scraped over a short period of time?). This is the first "filter" you should apply when narrowing your choices for candidate indicators.
Next, compare this filtered list to the "best practice" indicator list. Identification as a "best practice" indicator could be used as a second filter to further narrow your choices of candidate indicators.
Taking this approach ensures that organizations select measures of their business strategy that (1) are the best direct or proxy representatives of the objectives of the strategy; (2) already exist (therefore, requiring low to no effort to begin using); and (3) are backed by a "best practice" track record.
In my opinion, this is the best (but not necessary) way to leverage resources such as KPI libraries.
Have you ever used a KPI library to create or supplement your scorecard? Was your experience good or bad? What do you think about the idea of KPI libraries? Just click on the comments link directly below to share your comments and join in the conversation.