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Skill Level Intermediate
(soft music) - The real issue with today's KPIs, key performance indicators, is that their legacy is pretty much financial reporting. They're about sales numbers, profit numbers. They tend to be fairly simplistic. They tend to be about what's easiest to measure, we're going to measure. That's not to say that there aren't aggregates and putting things together that make performance a richer and more comprehensive thing, like oh, user experience. But the bottom line issue is that key performance indicators traditionally have been about are you hitting your numbers in a financial sense? Are you hitting your numbers in a way that the accountants and chief financial officer care about them? It used not to be an issue that concerned human relations people or marketing people. For the most part, KPIs were about are you doing the financial numbers in a way that makes top management happy? It's really not that KPIs contain hidden complexities. It's that more often than not, we really haven't thought about what we want the KPI to really mean. When I've spent time with organizations and they talk about their KPIs, I asked them what's key? What's the performance you're seeking to measure? What's the indicator there? What you really find more often than not is legacy KPIs, legacy metrics. Well, this is the way we measured it five years ago, so in the interest of consistency, that's how we're going to measure it today. So what in fact you have is an anachronistic metric and an anachronistic KPI that is not kept up with technological change. It's basically like saying we've done a great job with the radio audience in an era of television. It's like we have great click-through but nobody's sharing on their social media networks what they've clicked through to, so we're not measuring influence under those circumstances. So my concern is how do you create a dynamic KPI? Something that gives you continuity with the past, but allows you to chart a new trajectory, a better trajectory, a more profitable trajectory into the future. (soft music) KPIs are not just a way of telling you where you are. They're a way of suggesting and helping you navigate where you want to go, right? It's like the difference between a compass and a map, but you know, you have a sense of the direction, but you don't get the level of details that you want. But then as you change the technology that you have, satellite and GPS, cameras, infrared sensors, multi-spectral sensor systems, your ability to navigate and maneuver and explore and exploit opportunities, fundamentally change. That's why you want to avoid the risk of KPI's becoming a straight jacket, or something that you seek to comply to. KPIs of the past were managed in a do it or else way, in a command and control way. This is how we are holding you accountable. If you are not hitting your numbers, i.e. the KPIs, you are failing. You are underperforming. No, it should be a springboard. It should be a platform. It should be a way that you and your organization and your colleagues take off. So one of the important insights from the Sloan Management report my colleagues and I did was that we identified that leading organizations, smart organizations, sophisticated organizations, organizations that got maximum return on KPIs, they didn't manage their KPIs better, although they did manage their KPIs better, they used their KPIs to lead the organization. It's the difference between management and leadership. The numbers can be the same, but how you use them to measure and motivate as opposed to measure and force compliance is fundamentally different. Leadership and management are different and organizations that care about leadership use and develop and cultivate and share KPIs differently from organizations that have a management mantra, a management emphasis. (soft music) The serious insight that I've observed is that the best leaders and the best managers use KPIs to craft a narrative, to tell a story about why it matters on a human basis. On a human basis inside the organization and on a human basis with user and customer experience. There is a risk associated with getting people to understand their KPIs purely in a bloodless way, when in fact, the opportunity exists that it can create and enable rich narratives about value creation, value discovery, value sharing throughout the enterprise, throughout the value chain. (soft music)