Archive for January, 2010

smartKPIs.com Performance Architect update 4/2010

The case for using a Performance Management Glossary

Some of the most asked questions in performance management discussions, either online or during conversations are:

  • What is the difference between a mission and a vision?
  • What is a KPI? How is it different from a measure?
  • What is the difference between Key Success Factors and Key Results Indicators?

They are generally centered on clarifying terms such: Mission Statement, Vision Statement, Goal, Objective, SMART Objective, Critical Success Factor (CSF), Value Driver, Key Result Indicator (KRI), Metric, Performance Measure, Performance Indicator, Key Performance Indicator (KPI), Initiative and Milestone.

It is a positive thing to ask such questions and engage in discussions to clarify them. It is surprising how many different views are expressed on the similarities or differences between these terms.

What is interesting is that generally such discussions take place outside organizational boundaries. It is as if within organizations it is expected that staff have an understanding of them. Or as if such discussions are intentionally avoided within organizations.

The logical deduction is that if such discussions take place outside organizational boundaries, staff still have a need to clarify such concepts that is not fulfilled internally.

While this cross-polenization of opinions helps in building an informed view at individual level, in an organizational context things are different. While diversity of views is welcomed, a united common understanding of key terms used across the organization enables good internal communication. It also helps in understanding strategy and the contents of performance management reports.

However, glossaries of terms are rather the exception than the norm in the use of performance management systems. This is rather surprising considering that the expected benefits to effort ratio is one of the highest of all the components of a system.

The possible benefits of using them are:

  1. Conceptual clarity – Facilitate a clear understanding of the nuances of the cluster of performance management concepts
  2. Alignment of corporate vocabulary – Provide a single point of reference to clarify terminology used across the organization
  3. Building perspective - Paints a rich picture of available elements to be used as part of the performance management system and raise questions about the relationship between them.

The effort should be minimal as generally such glossaries average 50-80 terms, with 1-2 paragraphs of explanation each.

One of my favorite examples illustrating the importance of clarifying concepts through a glossary is the TOGAF 9 manual, containing The Open Group Architecture Framework (The Open Group, 2009). In version 8.1.1 of the manual, the glossary was a component of the Resource Base (additional to the manual itself). In the latest edition (9), the glossary is incorporated in Part 1: Introduction. It represents the third chapter of this part, following the Executive Overview (Chapter 1) and the clarification of core concepts (Chapter 2). The glossary is not considered an appendix anymore, but an important component of the manual, included in the introduction part, to facilitate the understanding of the rest of the manual.

Perhaps performance management implementations should have a similar approach, by considering the glossary not a nice to have, but a key initial step.

Ultimately, not what is written matters, but what and how is understood and used. However, every little bit of help in building clarity and alignment helps. While strategy management is compared to a safari in a savanna (Mintzberg et al, 2005), finding one’s way in performance management is more like an expedition in a jungle. The abundance of theories, frameworks, concepts and terms is much denser and requires a wider skill set to navigate. Performance Management glossaries have the potential to act as attenuators in reducing complexity. Ultimately it is all about getting smarter as the level of complexity increases.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Mintzberg H., Lampel J., Ahlstrand B., (2005), Strategy Safari: A Guided Tour Through The Wilds of Strategic Management, London, UK, Financial Times-Prentice Hall
The Open Group (2009), “TOGAF version 9“, Van Haren Publishing, Zaltbommel

smartKPIs.com Performance Architect update 3/2010

Performance Management IQ Test or a hermeneutic dialectic process

A new feature available on http://www.smartKPIs.com starting with this month is the smartKPIs Performance Management IQ test.

It consists of a set of 24 statements that appear on the screen one at the time. The task on hand is to decide what each of these statements represents from a set of 12 options:

  1. Mission Statement
  2. Vision Statement
  3. Goal
  4. Objective
  5. Target
  6. SMART Objective
  7. Critical Success Factor (CSF) / Value Driver
  8. smartKPI / Key Result Indicator (KRI)
  9. Metric / Performance Measure / Performance Indicator
  10. Key Performance Indicator (KPI)
  11. Initiative
  12. Milestone

Only one option can be selected as there should be only one option closest to the way the statement is understood and perceived.

The term “IQ test” is pretentious and used to illustrate that being smart in performance management transcends the mechanistic approach of being right or wrong. Having this in mind, the test should be used more as a guide to discover the rich diversity of views on how key terms are or should be used in performance management. Overall the test should be a fun way to rediscover the basics of a performance management glossary. Ideally it should also raise questions about what actually happens in practice, away from the prescribing nature of management books, academic articles and management consultant’s opinions.

To me there are three key learning points illustrated by the test:

1. Performance Management as a discipline contains elements that closely link it to a multitude of other disciplines and organizational capabilities: Strategy Management, Project Management, Human Resources Management, Accounting and Psychology, to name a few. Understanding such linkages and the origins of key terms are an important step in building a robust basis for architecting organizational performance.

2. The popular understanding and perception of certain terms in practice may be very different compared to academic and consultant’s viewpoints. What matters in the end is how such concepts are used in practice to generate value and not necessarily which is the “perfect” definition of what a KPI is.

As Stringer (2007) put it: “Constructions are created realities that exist as integrated, systematic, sense-making representations and are the stuff of which people’s social lives are built. The aim of inquiry is not to establish the truth or to describe what really is happening but to reveal the different truths and realities – construction – held by different individuals and groups. Even people who have the same facts or information will interpret them differently according to their experiences, worldviews and cultural backgrounds.”

3. Have an open mind in terms of rediscovering performance management through the lens of various viewpoints and be prepared to change perspectives or shift entire paradigms. According to one view, by completing the smartKPIs Performance Management IQ test you have completed a test and reviewed different opinions on specific topics. From another viewpoint (Guba and Lincoln, 1989), you have just completed a hermeneutic dialectic process, as new meanings emerge as divergent views are compared and contrasted.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Stringer, E. T. (2007) “Action Research, 3rd Edition“, Thousand Oaks, CA, Sage Publications.
Guba, E. G. and Lincoln, Y.S. (1989), “Fourth generation evaluation“, Newbury Park, CA, Sage Publications.

Date: January 16th, 2010
Cate: Nature

Sunset at St Kilda Beach

sunset-at-st-kilda-beach2

smartKPIs.com Performance Architect update 2/2010

Be smart about SMART goals, SMART objectives, SMART KPIs and smartKPIs

Oftentimes we take things for granted, without asking questions such as:

  • Where did this idea came from?
  • When did it originally emerge?
  • What were the conditions that lead to it?
  • Who contributed to its development?
  • How should it be used properly?
  • Why is it relevant today?

Terms such as SMART goals, SMART objectives and SMART KPIs are today part of the vocabulary in most offices from around the world. smartKPIs is a new term introduced through this website that can be useful in clarifying these concepts. Today’s post will partly address the above questions in terms of the use of the SMART acronym. It will hopefully raise further questions about the slow process of maturing of Performance Management as a discipline.

Theory base

The SMART acronym is one of the most used in business. It has its origins in the Goal Setting Theory school of thought (Locke and Latham, 2002, Locke, 2004). One of the early articles that outlined the benefits of identifying clear goals was published by Edwin Locke, considered along with Gary Latham, one of the fathers of the theory. The article cited studies demonstrating that:

  1. “hard goals produce a higher level of performance (output) than easy goals;
  2. specific hard goals produce a higher level of output than a goal of “do your best”;
  3. behavioral intentions regulate choice behavior.”

(Locke, E. A. ,1968)

Original version of the S.M.A.R.T. acronym

The popularization of the S.M.A.R.T. acronym itself started with an article published in 1981 by George T. Doran, a consultant and former Director of Corporate Planning for Washington Water Power Company, Spokane. In this article, with the title “There’s a S.M.A.R.T. way to write management’s goals and objectives”, he proposed the following criteria a S.M.A.R.T. objective should meet:

  • Specific – target a specific area for improvement
  • Measurable – quantify or at least suggest an indicator of progress
  • Assignable – specify who will do it
  • Realistic – state what results can realistically be achieved, given available resources
  • Time-related – specify when the result(s) can be achieved.

(Doran, 1981)

In addition, Doran made two important notes. First not all objectives must be measured across all levels of management, as in some instances the focus should rather be on the action plan for achieving the objective. Secondly, not every objective written will meet all five criteria. They should be rather seen as guidelines. (Doran, 1981)

SMART goals or SMART objectives

Almost 30 years on, the SMART acronym is widely popular and used. Google searches using the most common keyword combinations returned on 15 January 2010 about:

  • 138,000 results for “SMART goals”
  • 46,100 results for “SMART objectives”
  • 3,970 results for “SMART KPIs”

However, in terms of the initial intent of using the acronym, Doran (1981) inclined towards using the SMART criteria mainly for defining objectives. He acknowledges the following distinction between goals and objectives:

  • Goals represent unique beliefs and philosophies, are usually continuous and long term.
  • Objectives are seen as providing quantitative support and expression to management’s beliefs.

Considering this proposed distinction, the SMART criteria should only be applied to objectives. In practice, however the two terms are used interchangeably by organizations. Doran’s advice regarding this terminology issue is as relevant today as it was 30 years ago:

“Although it may be fashionable to debate the differences between goals and objectives in our graduate business schools, from a practical point of view the label doesn’t make any difference provided officers / managers agree on the meaning of these words. In some cases, goals are short-term and objectives are long-term. In others, the opposite is true. To other organizations, goals and objectives are synonymous. Time should not be wasted in debate over these terms. The important consideration is not to have the label get in the way of effective communication.” (Doran, 1981).

On SMART Key Performance Indicators (KPIs)

While there are many examples of objectives that are incompletely defined and don’t meet the SMART criteria, in the case of KPIs things are different. By its own nature and definition, a KPI is an indicator of performance with the following inherent characteristics:

  • Specific – it has to be specific to an area as it is linked to a process, functional area or preferably an objective, making it a SMART Objective
  • Measurable – it has to be measurable, otherwise it won’t indicate anything
  • Assignable – unless is assigned, it will not me measured
  • Realistic – setting targets is inherent in the documentation and use of KPIs.
  • Time - it is implied in the measurement process

So a KPI shouldn’t even be called KPI if the smart criteria are not met. For this reason, the term SMART KPI is in a way doubling up on the SMART criteria.

smartKPIs

smartKPIs is a term introduced by www.smartKPIs.com to describe the most relevant KPIs in use by organizations, KPIs that are truly “Key” for improving business performance. The term “KPI” has been used with largesse over time and it almost replaced the term “performance measure”. Every KPI is a performance measure, but not all performance measures are KPIs. There are hundreds of measures monitored by organizations, but only a few can be considered “Key”.

Out of these few, there is an even smaller number that is widely used across businesses, for good reasons. They are the “usual suspects” such as:

  • % Customer satisfaction
  • % Employee engagement
  • $ Total revenue
  • $ Net profit
  • % Projects delivered on time, on budget and according to scope

The criteria for smartKPIs are:

  • Being recommended for their usefulness in academic and practitioner publications
  • Frequency of use across Functional areas and Industries
  • Fulfillment of the criteria of how good KPIs should be defined and used.

Considering the “inflation” of KPIs in today’s business environment, identifying these smartKPIs will simplify the selection of relevant KPIs. It will also improve communication by enriching and clarifying a rather confusing glossary of terms that Performance Management as a discipline inherited over time.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Doran, G. T. (1981) “There’s a S.M.A.R.T. way to write management’s goals and objectives”, Management Review, Vol. 70, Issue 11, p35-36, 2p.

Locke, E. A. (1968) Toward a Theory of Task Motivation and Incentives., Organizational Behavior & Human Performance, Vol. 3, Issue 2, p157-189, 33p

Locke, E. A. (2004). “Goal setting theory and its applications to the world of business”, Academy of Management Executive, Vol. 18, No. 4.

Locke, E. A. & Latham G. P., (2002). “Building a Practically Useful Theory of Goal Setting and Task Motivation”, American Psychologist, Vol. 57, No. 9, 705–717.

smartKPIs.com Performance Architect update 1/2010

Performance Management and www.smartKPIs.com

aurel-brudan-wwwsmartkpiscomLaunched in November 2009, www.smartKPIs.com was met with overwhelming interest by tens of thousands of visitors from over 160 countries. A base of regular visitors quickly formed in a relative short period of time and it continues to grow with many registering as site users daily.

Why such interest in the subject of Performance Management and more specifically Key Performance Indicators (KPIs)?

What sets smartKPIs.com apart in addressing this interest in the subject?

On Performance Management

Business Performance Management is a dry subject for many. At individual level, annual performance reviews have been compared to preparing tax returns - it is hard to find someone who takes pleasure in completing them, but they are necessary and regular.

For others the topic is complex and rewarding. At company level, Performance Management Systems have been compared to washing machines that have to be properly installed and configured in order to operate as desired (Meekings et al, 2009).

Performance Management is still in the early stages of being established as discipline and the lack of standards makes using tools and concepts from this field a challenging task. There is a certain degree of confusion in the way terminology is used in the discipline both within academic literature, in practice and between them.

Faced with the challenging task of finding coherence in this universe of mostly unstandardised concepts, practitioners welcome tools and methodologies that bring clarity, structure and simplicity to Performance Management. The success of the Balanced Scorecard over the last 20 years is proof of that.

smartKPIs.com fits in this picture as a platform based community that can be used to:

1. Learn more and improve the understanding of Performance Management concepts

2. Review examples of Key Performance Indicators that went through a thorough documentation process

3. Manage personal libraries of KPI examples, selected by users as most suitable for the performance management initiatives they are involved in.

4. Source templates that can be used in better structuring the documentation used as part of organisational performance management frameworks or systems.

smartKPIs differentiation

The world abounds with Performance Management consultants and there are many resources available on the Internet. smartKPIs.com is not the first, nor the latest online platform available to the wider public.

What sets smartKPIs.com apart is:

  1. The combination of insight from practice with academic rigor. We value academic research and use its findings and principles. At the same time, abstract concepts are much better understood when analysed in context, in practice. In addition, practice refines such concepts and contributes to their evolution and usability.
  2. The ability to structure information in clear taxonomies, simplifying the analysis process. This enables visitors to better understand the discipline of Performance Management and the use of KPIs as a core organisational capability. The benefits, although indirect are to be seen at both personal and organisational level: “ I am convinced that the first essential of business success is the capacity for organized thinking” (Follett, 1940)
  3. Expertise in the field of Performance Management, through a “community of inquiry”. The definition of an expert is relative. Today, same as in old times, anyone can claim to be an expert in anything. Mark Twain is credited with using the phrase “an ordinary fellow from another town” as an explanation to the term. Will Rogers is credited with using the phrase “a man fifty miles from home with a briefcase” to express the same. In our times, the number of miles increased considerably and the briefcases were replaced by blogs, websites and accounts on social networking sites. In developing expertise we took the long but steady road of academic study, combined with learning from practical experience and generating new insights. Our approach to learning from practice is action research and it follows Peirce’s inquiry process of abduction, deduction and induction (Barton et al, 2007). More importantly, we have done over 10,000 hours of deliberate practice in the field of Performance Management both at team level and individual level by some of the team members. Academic research supports a causal relationship between the accumulated deliberate practice (guided, highly structured learning activity) and the level of expertise in an area. Deliberate practice being a “highly structured activity, the explicit goal of which is to improve performance” (Ericsson et al, 1993). Having said that, we are great believers in the power of collective intelligence. We see ourselves as informed facilitators of the interaction, collaboration and learning process that smartKPIs.com users will participate in.

smartKPIs.com metaphor

One metaphor that I think describes smartKPIs.com is comparing it to a tree.

  • It first needed a fertile land - Performance Management
  • A seed - myself as Performance Architect
  • A period of growth - the many years of deliberate practice
  • Branches - the team behind smartKPIs.com
  • Flowers - its website content
  • Nectar - the quality of the content
  • Bees - visitors of the website
  • Cross-pollination - the exchange of ideas in the online community
  • Fruits - Financial self sustainability of the website
  • Honey - Value generation for visitors, fed back into their organisations.

Enjoy smartKPIs.com!

Aurel Brudan

Performance Architect,

www.smartKPIs.com

References

Ericsson, K. A., Krampe, R. Th. and Tesch-Römer C.(1993), The role of deliberate practice in the acquisition of expert performance, Psychological Review, Vol. 100, Nr. 3, pp. 363-406.

Follett, M. P. (1940), Dynamic Administration. The Collected Papers of Many Parker Follett, edited by Henry C. Metcalf and L. Urwick, Harper & Brothers, New York, London

Meekings A., Povey, S. and Neely, A. (2009), Performance plumbing: installing performance management systems to deliver lasting value, Measuring Business Excellence, Vol. 13, No. 3, pp. 13-19

Barton, J, Stephens, J. and Haslett, T (2007), Action Research: An Exploration of its Logic and Relationship to the Scientific Method. Proceedings of the 13th ANZSYS Conference - Auckland, New Zealand, 2nd-5th December, 2007 Systemic Development: Local Solutions in a Global Environment