KPIs, Damned KPIs and worst practice
This is a true story, but the names have been changed to protect the innocent.
Imagine a large multi-national manufacturing company that says that it is interested in improving the way it anticipates, innovates and the speed at which it does these activities.
Imagine an organisation during a moment of critical change. An organisation so well oiled that they issued an email, on the equivalent of April Fool's Day (a day for practical jokes), announcing job cuts and the need for employee's to reapply for their jobs (I jest you not). Imagine a grand new strategy. All singing. All dancing. Imagine a stage, and a CEO charging all staff with making this company the number one choice for its customers. And imagine a bit tagged on the end about the need to empower people.
The head of Knowledge Management - let's call her, Sally - was given the task of "doing something." What? That wasn't clear. Why? Good question, but the Board developed a nice range of KPIs for her that included "develop a knowledge sharing culture." The fair assumption being - discussed in an initial meeting with her Board Member Line Manager - first of all, there must be a problem for the Board to have suggested that they needed a change of culture. And, second, that the Board expected this to be achieved over a period of time - surely nobody could ever see cultural change as achievable in a year! Any questions she asked were met with fuzzy responses and a general approach of "just do something."
Sally felt frustrated by the ambiguity, but set about the task. For example, she conducted a cultural survey, but she also decided to engage with Line Managers, in order to hear their specific challenges and identify the conditions that could work against a knowledge sharing culture.
What Sally discovered was a low trust, command and control hierarchy. Teams did not like working across business lines; even when they recognised an opportunity, they did not want to collaborate or raise the awareness of emerging opportunities. Sally conducted over 40 in-depth interviews and found that significant opportunities were being lost across the organisation - opportunities that directly related to challenges around anticipation and innovation. She also worked out that the potential for these opportunities - the loss - had sometimes ranged into tens of millions of Euros (as a note, this company is not in Europe).
When she probed around the reasons for the lack of willingness to progress potential opportunities to improve the way the company did business, she was constantly told the same thing, "it's not in my KPIs." It turned out that the vast majority of people just were not interested in emerging opportunities, only performance against KPIs agreed at the start of the year. Sally discovered that the KPIs were tightly formed and nobody seemed to care about anything but achieving their annual goals (a percentage of which was attached to a variable performance bonus).
Now, while Sally was conducting these interviews she stumbled upon another problem. The HR Director had a team that was redeveloping the organisation's core competency framework. The new framework was to include, "Knowledge Management." Excellent! However, nobody had consulted with Sally; for example, "Knowledge Management" is not really a behaviour and therefore not a competency; the descriptors that were developed only expected lower order thinking skills at the highest level of competency maturity; and the core descriptors did not integrate with divisional descriptors that were being developed independently of the core descriptors (don't ask!).
Sally quickly set about rectifying the problem. She linked the problem to a knowledge sharing culture and submitted a proposal for a new core competency to substitute for "Knowledge Management." Sally then produced a new five-level maturity framework to support the HR pathway (job design through to appraisal, through to professional development need and reward). It was accepted within 60 days and, as a result, today impacts the way that employees do business across the organisation.
Sally presented a report to the Board and highlighted the barrier to cultural change that was being created through the current approach to managing performance - those damned KPIs. Sally linked the problem to the new strategy and the values of the organisation.
The Board nodded thoughtfully.
She then demonstrated how she had accidentally stumbled upon the problem with core competencies and worked to rectify them.
The Board nodded thoughtfully.
Sally explained that this very issue with core competencies was typical of an opportunity that was being missed. An opportunity that could have long-term impact on the way the organisation goes about its business.
The Board nodded thoughtfully.
She presented charts and graphics, highlighting the impact upon the cost of doing business. The Board nodded thoughtfully. She showed them a roadmap for change and a budget that predicted a 900% ROI over five years.
The Board thanked Sally for her work and told her they would get back to her.
Four weeks later and Sally had not heard anything. She was called into a meeting by her Board Member Line Manager for her annual review. They went through her goals one by one. Sally outlined her achievement against her KPIs. She outlined her successes and the impact of her work, using the example of the core competency framework to demonstrate long-term impact. Then she received a shock. She was told that she had failed.You see, Sally had not achieved the goal of creating a knowledge sharing culture. Where was the evidence of actions. The interviews? No. The surveys? No. The key recommendations to the Board? No. The pathway to change with a 900% ROI? No. The unintended opportunity that she took advantage of; the new core competency descriptor that focused on collaboration? No.
Apparently, a knowledge sharing culture meant developing communities of practice. Only nobody had informed Sally of this - it was an unspoken expectation. Twenty percent of Sally's annual salary was based on a performance variable pay structure. Sally left the meeting with a 2% pay decrease.
Sally is no longer the head of Knowledge Management. She found a new opportunity, with a well-deserved promotion, and left.
No way, you say! It's true, I tell you.
I know, because I was there.
My thanks to 'Sally' for asking me to share this story with you - this was her idea.
