Thinking about outcomes
August 2024
Many organisations use key performance indicators (KPIs) to align departments toward goals, and usually to measure their performance as well. They’re a common tool and you might be using it in your job.
If you are using them, or if you are thinking about using them, you need to understand that they can be problematic. They can feel arbitrary, with no clear connection to the big picture. This disconnection can cause confusion and frustration on the people that are evaluated on the performance of those indicators, which can lead to disengagement and low moral.
This article explores how to create them in a meaningful way that helps people to understand what’s the overall goal of the organisation.
With that in mind, let’s get on with it!
What’s the problem?
In medium to big organisations, KPIs are set per department. Those KPIs feel disconnected from the overall company strategy, failing to achieve the alignment they are created for. What’s more, they end up creating behaviours that make more damage than good.
This is not something new:
When a measure becomes a target, it ceases to be a good measure
For example, a common KPI is to have a customer satisfaction score (whatever way you are using to get that metric) of at least 4 over 5. There are simple ways to get the metric up, you can give things for free, you can send someone to each client that has an issue with your product to try to fix it in person, etc.
This is going to keep your customer satisfaction score high, but it is likely to hurt your revenue and increase your costs, hurting your organisation in the long run.
There is no clear guidance on why you want your customer satisfaction score to be good, so the people which performance is evaluated by those KPIs feel that they are being treated unfairly, and they can decide to start gaming the metric.
How can you make this better?
If you are using KPIs, then there has to be a connection to the overall organisation improvement. This is important so your staff understand why those metrics are needed and where is the end goal that you want to achieve.
All you need to do is to change your focus to outcomes. Start thinking about what behaviours do you want your users to repeat? which ones do you want them to stop doing?
If you start with those questions, the answers give you the context the people need in order to do their jobs optimally.
In the previous example, maybe instead of having a customer satisfaction score of 4 over 5, what you want is for users to promote your products, or for them to place recurring orders. Whatever it is, you can then derive your KPIs, if you still need them, from those outcomes. But always keep the focus on the big picture and make it clear why you think the KPIs affect the outcomes you care about.
For example, you decide that having customers promoting your products is the outcome you want to achieve. A possible KPI can be for that outcome can be:
Because we want our customers to promote our products, we want to measure the number of reviews they write in our store. We want them to write at least N five star reviews every day.
Yes, you are still creating a metric, but the goal is not the metric itself. The metric is just part of a bigger, more important achievement.
This changes the focus from the metric to the outcome. It gives context and helps with alignment, making it clear why you are using those metrics in the first place. It also focus on an overall goal, not a local goal.
Remember, the important thing is not to improve the productivity of one department, the important thing is to make your organisation better.
That’s all!