Implementing KPIs
Contents |
Introduction
No matter, whether you have a small one man business or is the director for a large corporation; whether you manage a project, a portfolio, or are just trying to get a small task like making a grocery list and getting the shopping done in time, the knowledge of if you are on the right track and on time can prove crucial.
If you are a single person, doing a simple task, odds are, that you are at least somewhat aware of the progress. But if you are a manager, with multiple persons working with you towards a common goal, perhaps even trying to juggle multiple projects within a portfolio, it can quickly prove more difficult to maintain the overview of the combined work progress. In such a situation, the utilisation of some common measurements in form of Key performance indicators (KPI) can prove to be vital.
So, does this mean that KPIs are being implemented world wide? No; KPIs had a quick revival when they hit the management market back in the late 80s and the beginning of the 90s. But for some reasons the use of KPIs dried and died out during the late 90s. Coming into the beginning of this century almost none of the chief executives in any of the larger companies had their focus on the use of KPI according to David Parmenter [1], even though many companies could benefit for the use of them. The reasoning behind this declining focus can undoubtedly be found in the fact, that even though there long has been a common agreement of the need and the possible benefits of KPIs, the actual implementation process have been found very difficult to endure.
So, what does the litterature say
Comparable standards
Well, first of all, let’s take a look at where it counts. The different standards of project, program and portfolio management.
The ISO 21500 standard [2] is mostly focused towards the more hardcore values of project management, steering more or less clear of the softer human resource aspect. It does mention a few paragraphs about performance, but it on an overall level, and not very specific.
The IPMA [3] gets a bit more specific, and has a few mentioning about setting up control and reports as well as a specific paragraph regarding KPI in regards to Portfolio orientation.
The Prince 2 standards [4], get yet a level higher, mentioning the necessity to measure actual progress against performance target of time, cost, quality, scope, benefits and risk to make decisions, and recommend a review of team performance. In regards to communication of the Management Strategy it also mention reports on the communication process that are to be produced, including their purpose, timing and recipients, including, performance indicators.
The Project Management Body of Knowledge (PMBOK) [5][6] has the highest level of focus on performance measurements of the four standards. Using a key search of “performance measurement” a number of relevant topics can easily be found. This include topics such as “Monitoring and Controlling Process Group or project work”, “Continuous monitoring of ongoing activities” and ”Work performance objectives and performance reports; Including status reporting, progress measurement, performance forecasting and cost incurred.”
However, there are some issues with the description of KPIS or performance measurement within all the standards. First of all, they all have a description on a very high, general, level, without ever getting into depth with the ways of actually implementing the concepts of KPIs or performance measurements. Secondly, none of the standards put much effort or emphasise into distinguishing between performance measurement aimed at the executive senior level management, and KPIs aimed towards the project managers, which is of great importance.
According to the article “Winning KPIs, revisited”[7] it is important to have different KPIs for the executive senior level management and the department/project level management. Using the image of a car travelling on a road, the senior level management just need the information regarding, how fast the car is travelling, e.i. a speedometer. The project management on the other hand, can have a need to know which gear the car is currently using, how many RPMs the engine is running at, what gas mileage the car is getting etc.
The executive management does not have a need for information regarding the day to day performance. They need a larger scale; trying to forecast 3 months or 6 months into the future as well as looking at the same perspective in the past. Daily management on the other hand needs KPI to measure performance on a day to day development, perhaps even hourly measurements, to fully understand and comprehend the performance, and thereby being able to make the accordingly adjustments. It is therefore of importance to identify and implement the proper measurement tools for the correct receivers, otherwise you just run the risk of ending up producing information that cannot be turned into proper use at the level you are targeting.
The Setup
How to define KPIs
So which KPI to implement and use? This is the tricky question, and there is no correct answer nor no quick template; at least not if the intent is a lasting and functional solution. First of all, as explained in the last paragraph, there can be a large difference between which KPI to choose in relation to the intended target. A project manager needs much more current and in-depth information than a manager maintaining the overview of a portfolio or a company as a whole. A senior manager, having the grand overview, will also need comparable informations from all current projects, and at that level it is therefore essential to identify KPIs that are common across the portfolio or company. The project manager, in his day to day operations, do not have the same necessity of comparing against other projects, and will thereby have a lot more leeway in choosing which measurement to look at, in regards to what make sense within the specific project.
All above being said, there are of course some similarities across at least most portfolio management. Especially measurements depicting actual progress against budgeted time and cost expenses are common in most companies, but these are also figures that can prove difficult to act upon. Of course you are able to identify delays and/or budget overruns, but what is the underlying reason? To identify this, there is a need for an in-depth, more precise measurement; a measurement that are seldom common across individual companies, perhaps not even common across different projects within the same company.
For most good KPIs you can generally say, that the characteristics of it is often already known to the organisation. According to chapter 4 of the book “Project Management Metrics, KPIs, and Dashboards” [8], defining proper working KPIs therefore requires getting all the relevant persons involved. In order to get stakeholder involvement and agreement concerning the KPI, you will need to get the project manager, the client, as well as key stakeholders involved in the design and decision process. However, keep in mind; defining 20, 50 or even 100 measurements or metrics to look at will properly not prove difficult. The real test will be in keeping the numbers low, as well as defining the few true Key Performance Indicators; those getting into depth with the projects core business and revealing the true difference.
Scorecards and Dashboards
Looking at the distinguishing between KPIs targeting senior level management and project or department management, the talk will often also be related to an implementation of scorecards and dashboards.
These are two kind of setup that provides an easy and often graphical overview of the data and information. The distinction between the two can be close to non-existing, but bypically a dashboard focuses on the specific operational goals and will go more into details than a scorecard, where scorecards are typically focussing more business performance on the strategic level and as suck targeted towards the senior management.
Discussion
Strengths and weaknesses
So what are the strength and weaknesses of the KPIs?
Among the strengths of a proper working implementation of KPIs is a much grander overview. The task pf comparing performance between projects or just performance within a project becomes much more apparent, and you will get a quick and easy way to determining, whether the progress and performance is as expected or a proper action is required. With the implementation of proper defined, and working KPIs, the project managers, as well as the project members perhaps even have been a part of the definition and selection phase of the KPIs and thereby have an ownership. Otherwise they will still be involved and on board with the importance of the measurements, as well as see the benefits for both the company as a whole, but also for themselves as individuals.
Just as great the advantages can be, similar in size are the risks if the KPIs implemented are not performing properly, are not properly defined or have some defects. With KPIs implemented the management runs the risk of focusing more or less solely on the KPIs, and not keeping much attention to the surroundings and the environment in the company. With an improper performing KPI you can run the risk of thinking all is well, when actuality later proves that things have gone terribly wrong. Another risk of using an faulty defined measurement can be, that the project management of team members end up focussing more on achieving the goals set up by the KPI and thereby would have less focus on either actual progress of the work they should be doing, or disregard some task, as the KPI only measure on small task completion but not on entire project progression. A good example of an improper defined KPI could be a police force, that for the next long period of time, were giving the sole measuring point, that each individual officer had to resolve at least 10 cases of law injustice each day. Such a setup would properly result on a lot of police officers on the streets, writing tickets for traffic violations or solving similar straight cut cases. However, not many muggings, fraudulent- or murder cases would be solved, since time consumption per case would be far too high for anyone officer to take on the task.
Implementation advice
There are multiple ways to implement KPIs. However some are more expensive, or require a lot more back bone system than others. If the company have a huge SAP-system already implemented, odds are, that you can draw a lot of useful information from there, and build you KPIs on top of this. However choosing to deploy a large SAP-system, just to implement KPIs, is both a huge task that are very costly and time consuming, and will properly also be a huge overkill compared to the possible benefits. In such a case, a better and easier option would be to look towards solutions, where KPIs are delivered already embedded into software, or alternatively solutions where the software can draw from databases or spreadsheet already set up within the company.
A list of a few examples of such software based, as well as a short description for each can be found below. This is just examples, and should not be considered neither the full overview, nor as specific recommendations of these few products over others.
Coopilot [9]
This solution is a small mobile/tablet based application, that through 4 simple adjustable levers can provide management with an easy overview of how the individual employee view the communication and the coordination within a project. The app only has these 4 predefined levers, so currently it is a take it or leave it solution, at least for now. One could hope for either a further development, or at least a help to adjust the setup of the app if you place a large enough order, but whether this is actuality or just wishful thinking, only time can tell.
Simple KPIs [10]
This is a cloud based software solution, where all setup is done over the internet, and the result is shown in a simple dashboard or scorecard view, and loads of options on which KPIs to deploy. Also, there is no requirement of deploying the full array of KPIs from the get go; instead they can be implemented gradually as they are identified. The solution is therefore a quick an easy way into applying KPIs to a company, without the need of a huge backbone system, or a complete overview of the final setup. A downside to this solution is however, that all input are done manually, so adding many measurement points can result in a huge time consumption from the employees having to add the numbers.
Klipfolio [11]
Of the few solutions presented, this is the solution getting closest to an integrated SAP- or database system where you draw data from. The dashboard in Klipfolio can draw information from lots of different data sources, including but not limited to spreadsheet, database setup, SQL, emails, cloud based storage and communication etc. In this solution you can get the dashboard to auto retrieve information from the backbone, and update the dashboard more or less simultaneously. You are also able to insert transformation or manipulation of data, for instance through normal spreadsheet calculus, prior to it ending at the dashboard. This solution does provide the largest information, but will also require the largest backbone of initial as well as continuous flow of data, in order to function properly.
References
1. Parmenter D. Crunchy KPIs.: EBSCOhost. New Zeal Manag. 2004;51(11). Available at: http://web.a.ebscohost.com.globalproxy.cvt.dk/ehost/pdfviewer/pdfviewer?sid=e6e47b31-9400-4694-8a6f-af3afd0b00ce%40sessionmgr4001&vid=1&hid=4109. Accessed November 16, 2014.
2. Dansk standard, Rehacek P. DS ISO21500 - Vejledning i projektledelse Guidance on project management. Strateg Manag ITS Support BY Inf Syst 10TH Int Conf 2013. 2013:195-205. Available at: http://findit.dtu.dk/en/catalog/259199430.
3. Caupin G, Knoepfel H, Koch G, Pannenbäcker K, Pérez-Polo F, Seabury C. ICB - IPMA competence baseline, version 3.0.; 2006. Available at: www.ipma.ch.
4. Successful M, Tm P. Managing Successful Projects with PRINCE2.; 2009. Available at: http://www.tsoshop.co.uk/bookstore.asp?FO=1160151.
5. Pritchard CL. A Guide to the Project Management Body of Knowledge (PMBOK.; 2004:28-41. doi:10.1002/9780470172346.ch3.
6. A Guide to the Project Management Body of Knowledge (PMBOK. 2009. Available at: http://findit.dtu.dk/en/catalog/242691320. Accessed November 23, 2014.
7. Parmenter D. Winning KPIs Revisited. New Zeal Manag. 2002;49(9). Available at: http://web.a.ebscohost.com.globalproxy.cvt.dk/ehost/pdfviewer/pdfviewer?sid=e49f1001-51a6-4b54-acfd-ac7309ea6e77%40sessionmgr4004&vid=1&hid=4109. Accessed November 16, 2014.
8. Kerzner H. Project Management Metrics, KPIs, and Dashboards. In: ; 2013:117-163. doi:10.1002/9781118826751.ch4.
9. Mastrogiacomo S. Stefano Mastrogiacomo - Coopilot. Available at: http://www.stefanomastrogiacomo.info/. Accessed November 14, 2014.
10. SimpleKPI | KPI software for tracking Key Performance Indicators (KPIs) and performance management. Available at: https://www.simplekpi.com/. Accessed November 23, 2014.
11. Klipfolio - Your Online Business Dashboard Platform. Available at: http://www.klipfolio.com/. Accessed November 23, 2014.
