Why you should question your performance measures

Albert Einstein once said, “If I had an hour to solve a problem and my life depended on the solution, I would spend the first 55 minutes determining the proper question to ask…for once I know the proper question, I could solve the problem in less than five minutes.”

Einstein understood that identifying the right question would enable him to pinpoint the exact information he needed to answer his problem. Therefore getting to the answer would be a relatively easy step.

In a previous blog I described the concept of Key Performance Questions (KPQs), which help senior leadership teams to bridge the gap between strategic objectives and Key Performance Indicators (KPIs). The principle is exactly the same: by knowing the proper questions to ask in relation to desired performance outcomes you can easily identify the data and information needed to monitor progress.

A KPI Answers a Question

However useful KPIs might be in organizations’ performance management armory, they are by definition “answers,” – they provide a score, a ratio or data. In a strategy management framework, such as a Balanced Scorecard, KPIs support strategic objectives – but these are “statements,” of desired performance (such as “become a world-class product developer,”) they do not explicitly ask a question. For every KPI we need to be clear about the question it is helping us to answer. Too often do I see companies full of KPIs that provide “answers,” but without any meaningful context.

Case Example

When I work with clients I make sure they they spend more effort on identifying the questions than on selecting the KPIs (thus broadly supporting Einstein’s 55/5 observation). Consider as one example, the UK-based Northumbria Healthcare NHS Foundation Trust, where KPQ formulation was a highly inclusive approach that involved many groups of employees, as well as the board. “If we get the KPQs right then we will know exactly where we need to focus to ensure the delivery of the strategic objectives,” says Ann Farrer, who was their Chief Operating Officer at the time.

Farrer stresses that this is not just about selecting the KPIs but also the accompanying strategic initiatives. “I said that I didn’t want people to do any work on new initiatives until we had finalized the questions as the danger is that we would have ended up deciding on what we wanted to do and then working out the question that it would answer. This is back-to-front as we need to know what the question is first and then figure out what we have to do in answering it.”

In order to provide some guidance on how to design Key Performance Questions I have developed the following 10 best practice principles:

Design between one and three KPQs for each strategic objective

Key questions should be based on what matters in your organization – your strategy. Once you have clarified your strategic objectives you can start designing KPQs. As with the logic that it is better to restrict a strategy to a critical few objectives (so to enhance focus and clarity as to what’s really important) the fewer KPQs you have the better – and for the same reasons of focus and clarity.

Ensure KPQs are performance related

A KPQ has to be about performance. The aim is to design questions you need to regularly revisit and answer in order to better manage your organization. Performance related questions are those that enable an understanding of how well you are implementing your strategic objectives and to what extent you are meeting your objectives and targets.

Engage people in the creation of your KPQs

KPQs should not be designed in the boardroom alone. Designing KPQs is a great opportunity to engage everyone in the organization as well as key external stakeholders. Involve people in the process and ask them what question they would see as most relevant. Once you have designed a list of KPQs take this back to the subject matter experts or different parts within and outside the organization to collect feedback.

Create short and clear KPQs

A good KPQ is relatively short, clear, and unambiguous. It should only contain one question. We often produce a string of questions which makes it much harder to guide meaningful and focused data collection. The language should be clear and not contain any jargon or abbreviations that external people might not understand. Likewise, try to stay away from management buzz words and ensure that the question is easy to understand and use language that people in your organization are comfortable with, understand and use.

KPQs should be open questions

Questions can be divided into two types: closed questions and open questions. Closed questions such as “have we met our budget?” can be answered by a simple “yes” or “no,” without any further discussion or expansion. However, if we ask an open question such as “how well are we managing our budget?” the question triggers a wider search for answers and seeks more than a “yes” or “no” response. Open questions make us reflect, they engage our brains to a much greater extent, and they invite explanations and ignite discussion and dialogue.

KPQs should focus on the present and future

Questions should be phrased in a way that addresses the present or future: “To what extent are we increasing our market share?” instead of questions that point to the past, e.g. “Has our market share increased?” By focusing on the future we open up a dialogue that allows us to “do” something about the future. We then look at data in a different light and try to understand what the data and management information means for the future. This helps with the interpretation of the data and ensures we collect data that helps to inform our decision-making and performance improvement.

Refine and improve your KPQs as you use them

Once KPQs have been created it is worth waiting to see what answers come back – i.e. how well the KPQs help people to make better informed decisions. Once they are in use it is possible to refine them to improve the focus even more. This is a natural process of learning and refinement and organizations should expect some significant change in the first 12 months of using KPQs. Experience has shown that after about 12 months the changes are less frequent and the KPQs become much more powerful.

Use your KPQs to design relevant and meaningful performance indicators

Once you have designed a set of good KPQs linked to your strategic objectives, they can be used guide the design of meaningful and relevant KPIs.

Use KPQs to refine and challenge existing performance indicators

KPQs can be used to challenge and refine any existing performance indicators. Linking them to the existing KPIs enables the indicators to be put into context and to justify their relevance – or scrap if they don’t help you to answer a critical business question.

Use KPQs to report, communicate and review performance

KPQs can also be used to improve the reporting, communication and review of performance information. In performance reporting and communications, organizations should always put the KPQs with the performance data that is being presented. This way the person who looks at the data understands the purpose of why this data is being collected and is able to put it into context. Furthermore, it allows senior managers to reflect on the answers and so triggers a rich performance conversation.

As with any other aspects of a performance management framework, it is critical to regularly review the continued relevance and impact of the questions. As strategic objectives evolve, so should the KPQs. This reminds me of another great Albert Einstein quote: “You should never stop asking questions.”

This article is published in collaboration with LinkedIn. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Bernard Marr is a Best-Selling Author, Keynote Speaker and Consultant in Strategy, Performance Management, Analytics, KPIs and Big Data

Image: A journalists requests to ask question as European Central Bank (ECB) President Mario Draghi addresses an ECB news conference. REUTERS/Kai Pfaffenbach