Beware the KPI automatons! We can be trapped by what is easiest to measure with high frequency updates, drill-downs and dashboards. We like to bonus on what’s measurable and memorable - sometimes at the expense of what matters most.
My career has focused on discovering untapped potential and finding practical, affordable ways to act on that. The origins of new ideas are very often rooted in deeply objective reasoning about what matters and how robustly we perform on those factors. This needs to be looked at in an absolute, competitive and progressive context. How good are we relative to what we used to be, need to be and aspire to be? So I am a huge proponent of analytics and fact driven strategy directed to real improvements. Yet here’s the rub. The diagnostics used in strategy interventions are almost never in a bonus scheme or a monthly executive results deck or dashboard. They are not measured routinely and are often buried in the research function or enterprise analytics databases. So how can we think differently here?
What I have discovered through experience aligning KPIs to strategy is one simple framework. That is the concept of enabling and output KPIs. I learned the idea from Paul Polman when I was working for him at Unilever. One day he provoked disbelief by refusing to measure customer service. He said it was secondary and of little value to our boss, the consumer. He argued all that mattered was on-shelf availability. The truth was we needed both – on-shelf availability was the outcome, customer service was a primary (but not singular) way to enable that.
The “easy” bit of strategy is packaging the key themes and the optimistic narrative within a bold new ambition. The hard bit is resetting resource allocation and building the capabilities of your organization. This happens with consistency over a number of years such that the “training effect” kicks in and you get fundamentally bigger and better at the things that matter most. You build capabilities by adapting and strengthening the activity systems that drive your potential. You must define these and measure them carefully and consistently for improvement. The starting point doesn’t matter, the evolution to the level you need to attain does. These enabling KPIs measure your innovation funnel, your brand spend and tactics, your channel reach and penetration. What matters is the deltas. Are you making progress? Are you moving the needle? When you do, you can then admire progress in the output KPIs that are the demonstrable (and rewardable) proof that your strategy has worked in the market-place. Value creation, building brand equity, growing market share and most importantly for the best brands, market development.