smartKPIs.com Performance Architect update 8/2010

Applying Goal Setting Theory in practice: An action research exercise

In my previous updates I highlighted the importance of theory in performance management and introduced the goal setting theory as one of the most important informing the discipline. I also outlined the importance of understanding the complexities of setting targets.

At smartKPIs.com, we not only enjoy thinking and talking about performance management, but we also apply performance management concepts in our own work. Today’s update illustrates how goal setting theory was used in practice by the smartKPIs.com team through an action research exercise.

Situation: At the beginning of November 2009, the database of performance measures on www.smartKPIs.com had 600 published KPI examples. The growth rate of the database was constant in November and December, however limited and not optimized..

Challenge: To make the website content more relevant to the diverse profile of visitors, we needed to accelerate the rate at which new KPI examples were published.

Methodology: apply the Look, Think and Act routine of Action Research (Stringer, 2007)

* Look – we gathered relevant information and developed a rich picture of the various functional areas and industries part of the smartKPIs.com taxonomy.
* Think – we analyzed the documentation process and clarified the issues to be addressed
* Act – we established a plan, implemented it and evaluated results

Theory: use Goals Setting Theory principles (Locke & Latham, 1990)

Application of Goal Setting Theory principles:

  • Challenging but attainable. We established an overall target for the entire documentation team: Double the number of published KPIs in one month. From 1000 at the end of December 2009 to 2000 published KPI examples by the end of January 2010.
  • Specific rather than vague. We were aware that such a challenging target might lead to a decrease in the quality of the content. This risk was addressed by clarifying that the target had to be achieved while respecting the high quality standards characterizing the KPI examples documented on http://www.smartKPIs.com. This was reinforced by the establishment of work package with clear quality and quantity specifications.
  • Involvement of team members in the process of setting their own targets. We decided to split this target by working days and established the daily target number of KPIs for the team. This was divided by team member, taking into account the proportion of working hours allocated to this task each day. These targets were discussed and some of the team members adjusted them upwards, based on the level of difficulty of their allocated work package.
  • Ensure targets are measurable in terms of being clearly understood by employees: quantity, quality, time and cost. A spreadsheet was established to clarify daily targets and keep track of the progress. Weekly meetings were used to discuss progress, share learnings and adjust work packages.

Results:

* January 2010 – The target was met on the last day of the month: 1000 KPI examples were published in a 4 weeks period, as planned.
* February 2010 – The target was met one week before the deadline, confirming that the previous month result was due to an improved process, easily replicated from one period to another.

Outcomes: Performance management is more than just ensuring outputs are delivered as planned. It is also about using such outputs to deliver outcomes that generate added value. Here is how the output of 2000 KPIs published as planned during the last two months is generating value for smartKPIs.com:

1. The traffic to http://www.smartKPIs.com increased considerably. In February 2010, smartKPIs.com established a new site record in terms of daily visitors.
2. The traffic to the website remained constant even after stopping the advertising campaign we rolled out last year. After a brief decrease, the volume of visitors started to gain momentum. While other factors contributed to this, certainly the quality content published over the last two months, had its share in attracting new visitors. Thus the financial value generated by the added content can be estimated as the equivalent of a large share of our advertising budget for two months.
3. The continuous improvement of the quality and quantity of the content consolidated the recognition smartKPIs.com has started to have the international performance management community as a global platform for performance management knowledge integration.
4. Internally, the learning experience team members shared during this exercise contributed to the generation of new ideas and innovation, such as the launch of the Performance Management IQ test.
5. The experience itself and the achievement of targets confirmed the talent, dedication and work ethic of the smartKPIs.com team. It gave a sense of pride and satisfaction of getting the job done. Having the opportunity to plan, deliver and excel is in itself a powerful motivator and enabler of self efficacy. It is a story worth telling others: “…In December 2009, while working with the smartKPIs.com team on growing the website, we were faced with this challenge…We were a great team…And we did exceptional things…”

After all, as Albert Einstein said: “The value of achievement lies in the achieving.”

Notes:

No bonuses were paid for achieving the targets set as part of this exercise.
No paper was printed as part of the measure documentation process.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Locke, E. A., & Latham, G. P. (1990). A theory of goal setting and task performance. Englewood Cliffs, NJ: Prentice Hall.

Stringer, E. T. (2007) “Action Research, 3rd Edition“, Thousand Oaks, CA, Sage Publications.

smartKPIs.com Performance Architect update 7/2010

Setting targets, cooking steak and using thermometers

Setting targets is relatively easy if you want to make it easy – just pluck a number from the air, make it your target and strive to achieve it. However, there is more to target setting than a simple number selection.

One of the first things to be clarified when using target is why they are used. The answer might seem intuitively simple: to facilitate their achievement. Still, there are more reasons to using targets.

One of my favorite metaphors regarding using targets is the thermometer. Thermometers are used in multiple ways:

  • To check if the temperature is within certain limits. In medicine 37° Celsius / 98.6° Fahrenheit is considered the average healthy temperature of a healthy human body. In a way it can be considered a target, however a flexible one, based on a variance interval around it.
  • To ensure the temperature meets a specific value. For example, in cooking some dishes require a specific temperature to be reached as per the recipe. In this case, meeting the target temperature is required for the successful preparation of the dish.

Similarly, in other aspects of human administration, such as business, targets can be set for multiple reasons:

  • To learn – targets provide a good reference point for evaluating achievement and comparing results.
  • To motivate their achievement – as per the principles outlined by the Goal Setting Theory
  • To control / ensure compliance – to verify the achievement of a specific limit required as part of the successful delivery of a business plan.

In time, the latter two reasons worked hand in hand to overshadow the learning aspect of target setting. They work fairly well in the short term and bonuses based on meeting short term targets have become the norm in business. However, their long term impact is in many instances less positive. The Global Financial Crisis is only an example of the manifestation in practice of this thinking.

Coming back at the thermometer metaphor is as we would use thermometers only to check the temperature of the steak we are cooking (satisfying our short term hunger), having forgotten to also using them to monitor the temperature of our body, for long term health benefits. In practice (medicine and manufacturing) this is not the case – thermometers used in equal measure for learning and ensuring compliance. In business administration it is as if we have forgotten about the learning aspects of target setting… Reward and recognition driven target setting is the norm.

The implications at cultural level are important. Targets for control in many instances result in a dangerous combination of human greed and mechanistic behavior. This combination, coupled with ineffective risk management is one of the factors that contributed to the demise of many organizations in recent history. Having a good steak is generally easier and more appealing than monitoring health and learning about ourselves.

Fortunately, the body has the ability to self regulate temperature. Organizations, on the other hand don’t have a mature self-regulation system, again mainly due to the relatively low level of sophistication of organizational culture today. As a result rewards and recognition target setting seems to be a relic of 19th century management prehistory, a reflection of our inability to find the right balance in human organizations. After all, it took hundreds of years to evolve the thermometer to its current form. Scientific management has been around for less than 100. Maybe it is just a question of time.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

37 years of urban development

Melbourne Central Business District 1969


Place & Date Depicted: Melbourne Central Business District, Victoria, AUSTRALIA, 11 Nov 1969
Photographer: Laurie Richards Studio, Alphington, VICTORIA, AUSTRALIA, 11 Nov 1969
Source: Melbourne Museum

Melbourne Central Business District 2006

melbourne-at-night

Place & Date Depicted: Melbourne Central Business District, Victoria, AUSTRALIA, 18 Apr 2006

smartKPIs.com Performance Architect update 6/2010

An introduction to theory in performance management: Goal Setting Theory

In my previous update I highlighted the benefits of increasing theory awareness in performance management practice. It has the potential to positively impact the process of selecting, developing and using performance management solutions. Over the next few months, I will gradually introduce some of these theories, in no particular order.

A very important theory informing performance management is the Goal Setting Theory, which is considered to be one of the most effective motivational theories. It was formulated inductively based on empirical research conducted over nearly four decades by Locke and Latham. Its roots are based on the premise that conscious goals affect action (Locke & Latham, 2002).

An important note to make is that the use of the term “goals” in this theory. Goals are considered here to be the object or aim of an action. As the terminology used in performance management as a discipline is loosely structured, the goal setting theory itself applies to objectives, Key Performance Indicators and targets as well.

Principles

There are four general principles that are linked to an increase in motivation, thus generating optimal performance:

  • Goals should be challenging, but attainable. Locke and Latham (2004) found a positive, linear function in that the most difficult goals produced the highest levels of effort and performance. They also found that performance decreased once the limits of ability were reached or when commitment to a highly difficult goal lapsed.
  • Goals should be specific rather than vague. Research by Locke and Latham (1990) showed that specific, difficult goals consistently led to higher performance than urging people to do their best. As specific goals vary in difficulty, goal specificity in itself does not necessarily lead to high performance, but reduces variation in performance by reducing the ambiguity about what has to be achieved. (Locke, Chah, Harrison, & Lustgarten, 1989).
  • Employees should be involved in the process of setting their own goals. When goals are self set, people with high self-efficacy set higher goals than do people with lower self-efficacy. They also are more committed to assigned goals, find and use better task strategies to attain the goals, and respond more positively to negative feedback than do people with low self-efficacy (Locke & Latham, 2002, Locke & Latham, 1990). The goal–performance relationship is strongest when people are committed to their goals.
  • Goals should be measurable in terms of being clearly understood by employees: quantity, quality, time, and cost. For goals to be effective, people need summary feedback that reveals progress in relation to their goals. If they do not know how they are doing, it is difficult for them to adjust the level or direction of their effort or to adjust their performance strategies to adjust their performance strategies to match what the goal requires. Summary feedback is a moderator of goal effects in that the combination of goals plus feedback is more effective than goals alone (Locke & Latham, 2002).

Mechanisms

Locke & Latham (2002) propose four mechanisms through which goals affect performance:

1. Directive function. They direct attention and effort toward goal-relevant activities and away from goal irrelevant activities.
2. Energizing function. High goals lead to greater effort than low goals.
3. Impact on persistence. When participants are allowed to control the time they spend on a task, hard goals prolong effort (LaPorte & Nath, 1976). There is often, however, a trade-off in work between time and intensity of effort. Faced with a difficult goal, it is possible to work faster and more intensely for a short period or to work slower and less intensely for a long period.
4. Affect action indirectly by leading to the arousal, discovery, and/or use of task-relevant knowledge and strategies (Wood & Locke, 1990).

While Goal Setting Theory is generally analyzed at individual level, its principles are considered relevant at organizational level, too. Locke (2004) argues that goal-setting is effective for any task where people have control over their performance. Research in this field currently explores goal setting theory at both individual and organizational level. Elements of the Goal Setting Theory are present in various degrees in all aspects that relate to performance management practice. Linking theory to practice is up to all of us.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

LaPorte, R.E., & Nath, R. (1976). Role of performance goals in prose learning. Journal of Educational Psychology, 68(3), 260-264.

Locke, E. A., Chah, D., Harrison, S., & Lustgarten, N. (1989). Separating the effects of goal specificity from goal level. Organizational Behavior and Human Performance, 43, 270–287.

Locke, E. A., & Latham, G. P. (1990). A theory of goal setting and task performance. Englewood Cliffs, NJ: Prentice Hall.

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

Locke, E. A. (2004), “Goal setting theory and its applications to the world of business”, Academy of Management Executive, Vol. 18, No. 4, pp. 124-125.

Wood, R., & Locke, E. (1990). Goal setting and strategy effects on complex tasks. In B. Staw & L. Cummings (Eds.), Research in organizational behavior (Vol. 12, pp. 73–109). Greenwich, CT: JAI Press.

smartKPIs.com Performance Architect update 5/2010

On the importance of theory in performance management

Performance management is one of those disciplines that seem to be intuitively easy. It is closely related to everyone’s life. We all hear about setting goals here, achieving targets there, implementing strategies, writing vision statements, living values and so on.

It is not the same for disciplines such as risk management and enterprise architecture – ask someone on the street a question in these fields and there is a good chance the person will be much quieter than expected. Ask the same person a question about performance management and the chances of obtaining a response are much higher.

All of us have been exposed to performance management in some form through our lives, starting with childhood. Performance management is about doing well in sports, doing well in school, playing an instrument, doing well at work and contributing to the organization we are a part of.

So intuitively we know what it is about, why it is needed and how it works. But how many times did westop to think about these aspects? Or think about the way we think about performance management? Why does it work? What happens?

Such questions have been asked mainly by researchers (as oftentimes consultants are too busy consulting and experts too busy giving advice to ponder on such esoteric questions). As a result, responses to such questions remained mostly in the realm of the academia. And one of the all time favorite terms in academic literature, almost unknown (in the academic sense) to business practitioners is: theory.

The Merriam-Webster online dictionary states the following about theory:

  • Etymology: Latin (theoria) and Greek (theoria, from theorein)
  • Date: 1592. (Note: There must have been some other term used before that time, as theories are as old as Greek philosophy.)

Of all the uses of the term mentioned by this dictionary, the ones that I prefer are:

  • 1 : the analysis of a set of facts in their relation to one another
  • 3 : the general or abstract principles of a body of fact, a science, or an art <music theory>
  • 4 a : a belief, policy, or procedure proposed or followed as the basis of action <her method is based on the theory that all children want to learn>
  • 5 : a plausible or scientifically acceptable general principle or body of principles offered to explain phenomena <the wave theory of light> (Merriam-Webster, 2010)

So why is theory important in performance management? I propose three reasons why learning and thinking about the theory behind practice is important:

1. As performance management is such an embedded discipline in our life, it impacts us more than many others. It would be beneficial to know the logic behind many of the processes and tools used for performance management initiatives. A driver with a few skills in mechanics is a better driver than the one that doesn’t have a clue that there is an engine behind the bonnet and it requires fuel.

2. Understanding the theory behind practice puts us in a better position make informed decisions and to question solutions proposed to us. Too many performance management products and ideas and promoted and taken for granted. A more informed buyer is a smarter buyer and a happier customer.

3. Critically reviewing the theory behind practice enables us to question its validity and try improving it. How can we improve and advance performance management if we keep focusing on solutions without thinking why and how these solutions work?

Perhaps theory is another item on the already heavy list of elements the Balanced Scorecard should balance. Or perhaps we’ll forget give the Balanced Scorecard a break and start balancing things ourselves… Smartly…

Either way, next time you are offered a solution don’t forget to ask the question: So, what is the theory behind this? You might get lucky and the response will put a smile on your face for the rest of the day.

Stay smart! Enjoy smartKPIs.com!

Aurel Brudan
Performance Architect,
www.smartKPIs.com

References

Merriam-Webster Online dictionary (2010) Retrieved online on 6 February 2010 at: http://www.merriam-webster.com/netdict/theory

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.

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.