Solutions that fit this bill will include functionality for defining objectives (or goals), key performance indicators (KPIs) – we’ll use this term over metrics as we want to include the notion of a target as well as an actual value) and initiatives (high level activities). Key Performance Indicators in detail will be the subject of another blog.
The inclusion of initiatives is the aspect most likely overlooked. Without initiatives linked to objectives it is all too easy to lose track of what action is being performed to ensure action is being taken to achieve an objective and the resources, both in terms of money and people that are being assigned to the task. Furthermore, when teams are being utilized from across an organization the individuals assigned to an initiative may not report to the objective owner. By assigning owners to the initiatives visibility and accountability is achieved. Without this it is harder for an objective owner to manage work being performed on the initiatives in place.
Deciding what you are going to do (objectives) and how (initiatives) is fairly easy compared to defining suitable KPIs. However, it is the KPIs that are key to success (no pun intended). Selecting one or more metrics that truly measure performance on an objective determines whether you are really successful or just think you are. Let’s take an example from the game of soccer. It order to play soccer you need to be fit – pretty obvious. But what you really need is to be able to alternate between walking, jogging and then sprinting at high speed for short durations over a 90 minute period. So your objective is to be fit enough to be able to last 90 minutes and contribute throughout the game especially in the parts that involve sprinting and chasing after the ball. So you (or your coach) might decide that in order to meet this objective your training schedule (initiatives) should include lots of running. One way to do this might be to incorporate running fixed distances, with the goal of reducing the time it takes, into your training schedule. For example, reducing the time taken to run four miles from 36 mins to 28 mins. The problem here though is that even though you might meet your “goal” in running faster does it help you play soccer better and ultimately help your team win. It probably helps somewhat but you would be better served including drills that improve your sprinting ability along with the ability to keep playing at a competitive level for 45 minutes at a time.
We can (and should when thinking about KPIs) take this to another level. The fitness objective and associated KPIs are obviously important in a sport such as soccer. This would fall into the category of an output matric. Output metrics measure activity or results but not specifically the desired or eventual outcome from such activity. Examples from the business world would include number of widgets shipped or for the public sector the number of people vaccinated, and from our soccer example the number of goals scored or allowed. So fitness is a step towards winning soccer games but being fit, while likely helping, does not ensure or measure the ultimate goal of winning games or a championship. It may be (although not likely) that a much less fit team ends up being the winners.
In our training schedule for our soccer team we will likely have a number of input metrics (e.g. how many times we practice, how many times we run certain drills) which measure the effort and activity we are putting into our training as well as some output measures. When it comes to the actual matches our team plays we’ll also track some output measures, e.g. goals for and against. But what we really care about is the outcome measures. To this end winning is more important than scoring lots of goals. In this sense it is better to be the team that wins the most be it with low scoring games then one that scores lots of goals but doesn’t end up winning as many games (even though scoring goals is fun).
Understanding the distinction between input, output and outcome KPIs is an important step towards helping pick the right measures for your objectives. Deciding on and creating good KPIs are one of the hardest parts of strategy definition and something many organizations struggle with.
SAP BusinessObjects Strategy Management provides organizations with many capabilities to enable their strategic planning process and manage the execution of strategy.