on KPIs

Input specifications used to be the norm; we would be very specific about what we wanted and how it should be made and delivered, or performed in the case of a service. I can well remember deciding to go out and start replacing the fork lift truck (FLT) fleet at a logistics operation that I had just taken over. Having talked to the vehicle buyer they produced a spec that had been used previously; it was half an inch thick, had drawings of all sorts of components that are standard on any FLT and even had a requirement for a specific pantone colour plus three pages alone on the fleet number, font, style and positioning.

Having fallen asleep several times trying to read that specification I put it to one side and set out what I wanted the first batch of trucks to do, which took up less than three sides of A4 instead of the 60+ pages of the original. Why tell an experienced FLT manufacturer how to make the forks and mast? Just tell them what size and weight of pallet you are going to use, how high you need to be able to lift it and describe the working environment and shift leave it to them to propose a truck that will do what you need. In general an output spec will be the route to allow the market to best respond to your needs and allows innovative approaches to bubble up.

But there is another area where the input approach still tends to dominate and that is in performance reporting. My argument is that we often produce KPIs that effectively define the service to a point where innovation becomes stifled. Equally, the boxing in of performance over time can prevent the service from evolving to meet the needs of the organisation, especially where we are obsessed with measuring performance over time. How often have we seen a service provider meeting their KPIs whilst failing to deliver what is needed or vice versa?

Some of the contracts, and proposed contracts, that I get to see have performance criteria that rival the FLT spec that I described, even those that include an output specification which tends to make a mockery of the principle of allowing the market to come up with the best approach to whatever is needed.

Another derogatory aspect of too tight a performance regime is that is creates an industry around reporting, monitoring and reviewing how we are doing, and that is a waste of resource for both client and service provider. If one element of performance is how much you pay, and it almost always is, why spend money you don’t need to?

This is not to say that I am opposed to KPIs, because I’m not; we need to be able to have some headline reporting that helps us understand what is going on and allows us to investigate specific problems. But what we need are things that will help us move forward and, because KPIs are historic by nature, too often we find ourselves looking backwards. Already this year I’ve seen someone monitoring energy consumption. Nothing wrong with that, but they weren’t also monitoring weather, and the two are related, so one becomes meaningless.

KPIs should work for the benefit of both parties; so try thinking of them as a way to move forwards. Use the same thinking as you would to develop an output specification and be prepared to make changes as your needs change. Don’t lock yourself into the past; it’s over and gone. Think about delivering the future instead.



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