KEY PERFORMANCE INDICATORS

KEY PERFORMANCE INDICATORS (KPI’s)

Once upon a time, when you were allowed to tell Irish jokes, performance appraisals were rather rudimentary things. A short interview by your boss who would ask questions like “How do you think you’re going?” followed by the generic response was “Yeah, good” would just about do it. Pass.

But then, the idea that employees should have benchmarks to achieve started to creep into corporate culture. Moreover, goals to aspire to, like trying to catch a rainbow, became a thing.

I don’t know who invented the term Key Performance Indicators, but I suspect that it was human in middle-management named Eleanor who was tasked with the responsibility of making sure branch managers were busy at being managers and not doing cross-word-puzzles.

How could she tell if branch managers were doing stuff unless they had a list of stuff to do?

So, she developed a list of stuff for branch managers to do, and she called these things KPI’s.

The idea was pitched to the senior management, who rewarded her by giving her a list of KPI’s, which included a task to ensure that all branch managers were given KPI’s. Once the branch managers were issued with KPI’s, they issued their staff with KPI’s.

The concept spread, and like Oprah Winfrey giving away cars, everybody got a KPI, even the CEO. Not one, or two, but a list of KPI’s as long as your arm. The more KPI’s, the better, right?

KPI’s measure things that can be measured, and thus being quantifiable, can easily be entered into spreadsheets from which impressive tables and charts can be produced. Spreadsheet gymnasts will make the data look good on a dashboard or Power Point slide, even if it doesn’t reflect a real improvement in business outcomes.

For a bank branch manager, their KPI’s might have included things like zero entries on audit reports, 20 cold calls to customers each month, attendance to monthly Chamber of Commerce meetings, zero customer complaints, prompt completion of monthly reports to the Regional Manager and delinquency ratio on loans not to exceed x%. Success at achieving these goals would guarantee a good performance appraisal, but would it be the guarantor of business growth?

A branch manager under my supervision once said to me “Tell me what to do, but not how to do it” So, I told him that his goal was to increase his branches loan book by 10% without sacrificing loan quality. I did not care how many cold calls he made, or how many out of hours meetings he attended. He could have done naked star jumps outside the branch to attract business if that was his thing. I didn’t care. Well, I suppose I would have had concerns because that behaviour probably is a against the law. I certainly wouldn't condone naughty things. But, any activity that would not attract the attention of lawyers would be ok.

He was a “street-wise” operator who sense of purpose was to help people and was popular because of his manner and genuine desire to assist customers. Measure that.

His loans book outgrew most other branches without sacrificing loan quality. His delinquency ratios were no worse than others.

The only KPI that truly remains valuable is the one that drives tangible outcomes.

You know the well-used adage: Not everything that matters can be counted, and not everything that can be counted matters.