KPI Fever: Beware Magic Metrics

Every company I visit these days is talking key performance indicators (KPI’s). This tells me that people understand that financial metrics aren’t (and never have been) enough to measure organizational success. But I worry about how using the shorthand KPI for all non-financial measurement could doom companies’ efforts from the start.

The problem is the word “key.” A lot of experts recommend finding a small number of key indicators that can be tracked easily so that you don’t get overwhelmed and spend all your time on measurement. I am sympathetic to this view but I am much more concerned about the danger of narrowing down your metrics too far. Part of the answer was in my last post about using some metrics for management and some for learning.

One thing is clear, however, it is never a good idea to rely exclusively on a small number of indicators. This warning is necessary because business publications are full of articles about what we call magic metrics. They offer an easy solution that will seemingly solve all your problems. Following are just a few examples. Read more

Why are you creating your measurement management system? (And do you really need a balanced scorecard?)

A few years ago, I read an article by Ian Graham called, What’s Wrong with Targets? Graham made the case that setting targets or goals for employees creates the wrong kind of behavior. This is because it focuses the employee on the target rather than on the underlying processes that create value for customers and stakeholders. And once a goal is achieved, there is often no reason to reach further. He also asserts that targets can be gamed. The alternative he suggests is to focus on specific processes and measure everything you can with an eye to continuous learning. His perspective comes out of the quality movement and the concept of continuous improvement.

We thought of Graham recently when we read an article about the games that colleges play to ensure that they meet the thresholds for statistics used by US News and others to “rank” colleges. Areas that can be manipulated include soliciting alumni donations of as little as $1 to increase their alumni giving percentage, giving more weight to applicant GPA and SAT scores than in the past, and manipulating class size.  Anyone who has ever worked in a for-profit or not-for-profit organization knows that goals can drive behavior in good and bad ways. Read more

Case Study: Visualizing and Communicating Corporate Value Through Intangibles Management

Last week, I helped lead a full afternoon workshop organized by the Intangible Asset Finance Society at the Think Tank and Auction hosted last week by ICAP Ocean Tomo in San Francisco. (The auction was fun to watch–here are a few Tweets about the auction).

My co-presenters for the afternoon were Nir Kossovsky of Steel City Re and Andy Gibbs of CXO IP Advisory. We opened up by each making some comments about our perspectives on intangibles management and emerging intangibles markets. My slides are here–I will add links to Nir and Andy’s presentations if they are posted online.

Then we moved to a case study discussion. The discussion was very robust. Since we usually cannot share the contents of client work when we engage in this kind of exercise, it is a great opportunity to share with you how this kind of approach works in practice.

Here’s a summary of the case we gave the participants. Read more

Call on Intangible Asset Risk and Reputation Metrics

Intangible Asset Finance Society Monthly Call: The President of Intellectual Capital Advisors, Mary Adams, will be hosting Nir Kossovsky on the IAFS monthly call this Friday, July 10th at noon EDT.

Nir is the Chief Executive & Director of Steel City Re, a firm focused on innovating new ways of managing intangible risk. He is also an entertaining speaker and will surely keep Mary on her toes! The call is free but you must register to get the conference information. Hope you can join us!

Simple but Powerful Ways to Generate Ideas and Track Satisfaction

Michael Fraser is someone who gets the power of using technology to put knowledge to work within the organization. He has held a number of positions since I first met him. Currently he is the Recovery Act Program Manager for the Loan Guarantee Program Office at the Department of Energy.  He recently wrote to me:

One experience I wanted to share was about employee ideas for improvement. On a former project known as CHRIS, one of the major subsystems was Employee Self Service which was a home grown web site built in Cold Fusion. All employees and contractors had access although the contractors’ was limited to a smaller subset of functions. Read more

Gartner on Investor Communication

The McKinsey Quarterly recently ran an interview here with Gartner CFO Christopher Laford. In the interview, he explained that:

When our new CEO, Gene Hall, joined, we established a long-term financial road map as a key element of our investor communications. We told our investors how we were running our businesses and where we thought we could drive performance over the long term-key measures, like revenue growth by business segment and margins.

And when we did that, we also identified the two or three metrics, for each segment, that would help investors understand Read more

Metrics Innovation

Strategy + Business published a great article here on how powerful and important the creation of new metrics can be. It cites the creation of “horsepower” to help people envision the power of Watt’s steam engine, “99-44/100% Pure” as a way of describing Read more