Evalesco

After years of consulting to organisations and helping them to build or improve strategic management systems, one of the most complex tasks remain to design useful performance indicators. In many ways this process can potentially undermine the success of the whole system, as the indicators are the “eyes” of the strategy and if we can not “see” how our strategy is unfolding by means of our performance results, we will not know if we must adjust this or that way or if we are even on the right way after all.

Of particular importance is to assign a well thought through name for the indicator. If the name is not clear at first glance, this may indicate confusion about what must be measured in the first place.

Herewith a few suggestions that may help to improve indicator names in our scorecards and plans.

Be specific

Avoid using general terms or jargon that lack specific meaning and may lead to confusion or misinterpretation. Eg. “HR Policy promulgated”. What does “promulgated” mean? When the policy has been approved? If everyone has access to it? If the processes affected in it are addressed?

In addition, if there is no indication of how the result must be calculated the performance values may be meaningless. E.g. “Staffing Levels” with its target of 80. Is it the average staffing levels the last period, or the number of posts filled by the end of the year?

Is more better or worse?

If it is not obvious at first glance what is being measured must be more or less to be good, people will not be able to set realistic targets or interpret if the results are good or bad. The measure name must make it easy to predict the direction of the measure – more is better, less is better or closer to target is better.

Avoid complex names, which may complicate the interpretation of results terms like percentage increase or percentage reduction. “Percentage reduction in cases of fraud and corruption reported”. Must we set targets for the percentage of cases reported or the percentage reduction? Will it be good or bad to have a high target?

Make it time-bound

Failing to include a time frame for the indicator can make it challenging to interpret the targets and results eg “Number of patents received”. Is that the total patents received for the year, last week, the quarter. This will matter when someone, especially from outside the company, tries to interpret the reported performance and even when targets must be set internally.

Preferably, name the indicator so that WHAT will be measured, HOW OFTEN and HOW results must be calculated, comes across a clear as possible.

Keep it simple

Our rule of thumb is to “Keep It Simple Stupid”. We do this by applying our Indicator Name Template:

[Calculation method] [Context] [Performance Attribute] [Time Frame]

[Percentage] of [improvement suggestions] [implemented] [quarterly]

[Sum] of [supply chain processes] [automated] [annually]

[Total number] [productive hours] [worked] [per week]

There are cases when not all the elements in the template are applicable or required e.g. [Average] [billing] [] [per month], it is always useful to apply the template to test if the name is complete and clear

Conclusion

In summary, a well thought through indicator name will simplify the management of performance greatly downstream. Applying a simple template to its name will assist in formulating a quality performance indicator.