One of the questions we frequently hear when consulting with different companies is how to connect their performance management system with the company’s overall strategy. In a good-case scenario, the performance management system is some sort of KPI software. In a bad-case scenario, the system is a series of calendar reminders, KPI spreadsheets, and a bunch of reports jammed in a dusty filing cabinet, but that’s another story. Typically, the organization has been using the system for years, and the leadership is very proud of it.
The first challenge then becomes how to convince the leadership to set their beloved system aside for a moment and shift their focus from KPIs to strategy. This process of “emptying your brain” of your cherished KPIs is hard for many. The underlying issue here is that oftentimes the leadership wants to change without having to change their way of doing things too much. Changing people’s mindset and habits is one of the toughest things to accomplish in an organization.
The next challenge is going through the following exercise:
Step 1 – Show me your strategy
In order to have your performance management system reflect strategy, you must first have a strategy to implement. This involves formulation of your organization’s mission, vision, goals, objectives, and action plans to reach those goals and objectives.
Step 2 – Translate and structure your strategy
- Clarify your strategic objectives — what do you want to achieve?
- Show how your strategic objectives are aligned with the overall strategy — perhaps through a strategy map
- Develop a plan of how to achieve your company’s objectives through establishing/aligning your company’s initiatives
Step 3 – Assess your KPIs
On completing steps one and two above, look at the KPIs in your performance management system to assess which ones can function as an expression of a strategic objective achievement. Those are the KPIs you want to focus on!
Completing this exercise requires a lot of thought and all hands all deck. Don’t try to do it overnight and get buy-in from the whole organization! What you’re likely to realize after completing all steps is that, in terms of reaching your strategic objectives, some KPIs carry more weight than others, and that some carry no weight at all! They’ve been just clutter all along.
Your strategic objectives will serve as a guide on which KPIs to keep, and which ones to get rid of. It’s possible that some of the KPIs that are irrelevant to your strategic objectives still represent important information, so you may want to keep those. As far as the rest is concerned, it’s best to send them to the KPI graveyard.
