Volume No. 65
How Many Measures Are
typical in any installation of an enterprise-wide
Performance Management framework, managers and employees
often balk at the volume of measures and data that are
represented by the selected KPI’s for the business.
Such was the
case for me in a recent project that spanned six major
business areas, from Energy Supply to Delivery, and also
included all of the company’s administrative, customer, and
infrastructure support areas. In total, the number of KPI’s
selected were just over 100 and represented both “level 1”
indicators (business unit goals and top level result areas)
and “level 2” indicators representing a suite of KPI’s that
reflected the individual performance of each area (roughly
4-6 each). For the client, that appeared to be an overly
heavy dose of data and information to absorb.
In part, the
client is right, this is a lot of information, being that
each metric will require numerous data elements to assemble,
and further complicated by how many different ways the
client will want to view the data (by business unit,
component, region, etc.). So yes, this is a lot of data. But
is it too much?
As with most
questions like this, there are a few dimensions to the
First is the
question of sheer volume. As a matter of comparison, there
are clients of mine that started with a single business unit
that had over 1400 KPI’s, and others that started with only
5-10 at the entire company level. Yes, 1400 is too many (and
to call them KEY Performance Indicators is clearly a
stretch). And yes, 10 for the entire enterprise is too few.
But by sheer numbers, 100 would fall on the lower end of the
spectrum, yet broad enough to be representative of the
business in general.
2. Second is
the architectural aspect of the measurement framework. We
are not talking 100 metrics to be consumed in “one sitting,”
but something designed to be managed by a collection of
individual managers – in this case between 30 and 50
managers depending on the level of management. Any good
balanced scorecard will have a “line of sight” or pyramid
aspect to the architecture, typically flowing from the
mission to the key result areas, to the supporting
objectives, and finally to KPI’s and metrics. So the
question of “too many” or “too few” really depends on what
level we are talking about. At the key outcome level, 100
would be ridiculously high, and at the KPI level it would be
just as ridiculously low.
3. Third is
what I will call the soundness or “sniff test” element – the
question of whether there is unnecessary duplicity,
redundancy or inconsistency in the universe of measures
selected. The test I apply here is what I call “complete and
discrete.” For each area being measured, does the set of
KPI’s adequately measure (80% or more) of what the function
or process is there to produce? And are each of the measures
somewhat mutually exclusive (i.e. not redundant)?
the test of relevancy does have to come into play. This one
is tricky because you need to strike a balance between being
relevant to everyone and relevant to a particular process
owner. Often, you may elect to include a few measures that
are in the proverbial “grey area” so as to not
disenfranchise a key business unit leader or process
manager. Sometimes, a judgment call.
three tests, we would normally conclude that the 100
measures selected would be reasonably appropriate given the
size of the enterprise and breadth of business units at
analogy to consider. Think about a football coach who meets
with the team at halftime of the big game. The most
significant outcome is whether they are winning or losing.
On the surface that is what really counts. Keeping it
simple, one might also be able to add in some evaluation of
offence, defense and special team’s performance. Four
measures that in total pretty much tell the story. Simple
But is this
enough to drive a real understanding of what is really going
on in the game? Not really. As the team breaks out into
their individual units, simply telling them that they had
150 yards of total offence reveals little if anything in
terms of what needs to change. With just that information,
the conversations would be very short and somewhat pointless
in terms of managing performance.
That is why
offense, for example, is often broken down into metrics like
number of first downs, time of possession, yards per carry,
number of “touches” per key player, etc. So extrapolating
out, there may be 2-3 dozen measures for an 11 man football
team required to effectively manage a 60 minute contest.
My point to
you is this: It’s ok to aspire to simplicity. We all want to
keep the message simple and not confuse the troops. But
let’s also remember that we are managing a business that
does have some complexity to it. We are often talking
several thousand employees and a business strategy that
transcends many years. While 100 metrics may sound daunting
to a company at first, it is really just scratching the
surface in terms of the volume of drivers and levers at play
in a comprehensive EPM framework.
test of whether the volume of measures is right is how it
stacks up against the tests outlined above, and how well
your overall framework holds together.
notwithstanding, some good rules of thumb to follow for an
enterprise with multiple business units:
- 2 to 3
broad business goals (usually things like revenue, growth,
- 5 to 6
outcome areas (perspectives that need to be managed, like
Financial, Customer, Operations, etc.).
- 2 to 3
objectives within each outcome area (e.g. Customer
satisfaction, Customer retention, etc.).
- and a
collection (usually more than one and less than five)
measures (whatever is necessary) to adequately reflect
performance of each objective in a meaningful way.
certainly not a hard and fast rule, but should give you some
parameters to go by.
Bob Champagne - UMS Group, Inc., a privately held
international management consulting organization specializing in
Performance Management tools, systems, and solutions.
Included in UMS Group's product portfolio are a wide variety
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