KPI WBS
Measurement Framework for Managing Enterprise Change
Data, data, data – we need data! We need data about our products, about our customers, about our suppliers, about our performance. We need data to manage and we need data about how we manage so we can manage better. The talk about data has become common. Companies spend incredible amounts of money and energy to collect and analyze data. Data collection, just like any other project, requires prioritization – we need to understand what data we need, why we need it and when does it make most sense to have it. Data needs to yield insights that help solve problems. Knowing which problems to solve and when is the key.
Our desire for more data is partially driven by technological advances that are giving us the ability to collect and analyze extremely large sets of data, and partially driven by our style of management, our approach to decision-making. Agile is a good example – its’ core belief is to embrace change. This embrace, by definition, means more change, more variation in the system. This leads to a greater complexity, making it harder to understand and manage all that change across the enterprise. A more complex system produces more data and requires a more sophisticated analysis to be able to make decisions regarding what to do and when. How we make decisions in a complex system has a significant impact on our data strategy.
When it comes to data and information that is needed to manage change, to make priority decisions on projects, Key Performance Indicators (KPIs) play a crucial role. They help determine whether a certain process is doing well or not, whether we are getting the planned outcomes and so on. KPIs help tell us if change is needed. The challenge with KPIs is that either they only partially exist or there are too many to make decisions effectively. Many companies have struggled establishing an effective and efficient KPI framework that would give the right level of visibility into the business performance without overwhelming people with endless reporting and without creating analysis paralysis.
To help solve the problem of not enough KPIs or too many KPIs which both lead to ineffective prioritization, I recommend a simple KPI framework that will give the right amount of information for needed decision making and change prioritization. I call it a KPI Work Breakdown Structure or KPI WBS. Use it as a starting point or as an add-on to what exists currently. Regardless of the use, it will help look at the company through a different lens and it will help make better decisions, reducing re-work and delivering more value faster.
To start, organize KPIs (existing or new ones) into three levels: Strategic, Operational and Tactical. Strategic KPIs help answer how much value the system creates and how efficient this process is. These measures are typically found in the financial statements. Operational KPIs help determine how good the company is at managing supplier, employee and customer experiences. These KPIs are the hardest to define, but they pack the greatest value for the change prioritization purposes.
To help define Operational KPIs, start with a Value Stream – a high-level process flow diagram that shows how inputs are converted into outputs. Show each business function and label it as either “value contributor”, “support and enablement”, “control and monitoring” or “change management”. Then it’s on to define how to measure each of these functions. For example, a KPI for a value contributing function can be Throughput per unit of time or a number of defects. An enablement function may measure uptime or number of support tickets. A monitoring function may measure regulatory audit findings and compliance gaps.
Tactical KPIs help answer how efficient each team is at their specific function. These measures help monitor the productivity per unit of time. Tactical KPIs would most often be used for internal continuous improvement initiatives where teams try to improve how they do their daily work.
Once Strategic, Operational and Tactical KPIs have been defined, the next step is to take each measure through a Statistical Process Control (SPC) analysis. This exercise will help differentiate the noise of the system from its signals – the data points that require further analysis and action. This is a critical element of an effective KPI framework. SPC is one of the most effective tools available for separating data into actionable and non-actionable. Imagine if you had visibility into all key organizational measures, clearly organized and categorized, connected to one another and evaluated for signals and further required actions – how different would a prioritization exercise look, how much less work the teams could be doing!
Not all change is good and not all data is actionable. Having the right data, in the right context, with clear indicators for action and inaction – all of this can be very impactful to how projects are selected, prioritized and executed. Try building a KPI WBS, build a high-level Value Stream, identify appropriate measures and collect available data. Then, take it through SPC analysis and see what insights you gather. Take these insights and apply to your current project workload and either confirm priorities or adjust, as needed.
