Step 2: What got you here, won't get you there

Several years ago I was asked to update the Whistleblowing policy at the company I was working for. Several international scandals made the regulator worried about the culture within the industry. Of course we had a whistleblowing policy in place, but it was time to see whether it met the new and stricter standards. Not only was it important to rewrite the document, it was also expected to ensure a culture in which whistleblowing is possible.

Together with my team we updated the policy, created an awareness campaign, published everything on Intranet, and incorporated the policy in existing Compliance trainings. We created several KPIs to measure whether our activities were effective and if the expected culture was in place. It was decided to measure these KPIs several months after the implementation was finished. Here are some examples of the KPIs we used:

• How many employees did the Compliance training?
• How many employees know about the Whistleblowing policy and procedure?
• Were employees able to find the whistleblowing policy and instructions?
• How many employees actually used the whistleblowing policy?
• How many whistleblowing cases were registered (before and after the campaign)?

Many employees did follow the compliance training, but this was no surprise. These trainings are mandatory for all employees. When we did a questionnaire it turned out that many employees did know that whistleblowing was possible, but only a few people knew about the policy and procedure. Even worse, almost no one was able to tell where the instructions could be found on Intranet. But the most surprising results came from the last two KPIs. Only a handful of cases were filed in one year. The KPIs were telling us that we had failed.

But then we realized that we had been using the wrong KPIs all along. The goal of a whistleblowing policy is that is used as little as possible. An organization should have a culture where employees can openly report incidents, without fearing repercussions. And it is of course not strange that most people did never found themselves in the situation and therefore didn’t know where to find the procedure. We decided to change the performance indicator. We looked at the number of incidents that were openly registered with the Security department. Turned out that employees did indeed file cases and did so openly. 

Choosing wrong performance indicators inevitably leads to wrong conclusions. You could measure the world if you want, but measuring the right behavior is key. This leaves you with a paradox. On the one hand you want as less KEY performance indicators in order to keep things simple. On the other hand the world is a complex place and many factors might be influencing the outcome of your succes. How are you ever gonna know whether you chose the right one(s)?

Lets say that your goal is to have satisfied employees. There are plenty of ways to make them happy, but you should ask yourself what behavior is actually showing you that they are. Less sick leave? Employees saying that they are satisfied? Less people leaving the organisation? Increased customer satisfaction? It might even be the case that the actions you took to make them happy, are not the ones that actually make them happy. That might result in choosing a Key performance indicator, that relates to your actions but not to the actual satisfaction level. For example, let's say that you made internal "job hopping" more easy (because in general that makes employees happy). But measuring the number of people that actually hopped to another job, might say nothing about the actual level of satisfaction.

Choose your KEY performance indicators wisely. Go back to your goal and think "out of the box". Once you have decided upon (no more than a couple) KPIs, stretch yourself and try to think of three completely different ones. What got you here so far, won't help you getting there....

Next time step three: Develop the indicator that measures the performance

Step 1: Setting goals and avoiding banana peels

Did you follow the FIFA World Championship last month? Even for non-soccer lovers it must have been quite a show to watch. Heroic actions, crazy supporters, utter and deeply felt joy, drama. All this makes an event epic. Now imagine a World Championship without a prize. No World Cup and no World Champion. All these matches, supporters, trainings, money spent; just for fun. That wouldn’t be the same, right?

A World Championships without a World Cup is like a KPI without a goal. The goal is what gives the KPI meaning. A goal can provide purpose to an otherwise meaningless task. It is a standard for assessing effectiveness (Locke & Latham, 2009). It is therefore that goal-setting is being promoted to improve performance in organizations.

As long as a person is committed to the goal, has the requisite ability to attain it, and does not have conflicting goals, there is a positive, linear relationship between goal difficulty and task performance (Lock & Latham, 2006). In other words, the more specific and challenging the goal, the better the performance.

Perfect! As long as we set one unique, unambiguous and challenging goal, we should be able to start measuring the performance it boosts. Unfortunately setting goals isn’t as easy as one might think. One should be careful in defining and implementing them, especially because they heavily influence our behavior. There are many pitfalls that endanger setting right goals (and setting the goals right).

Watch out for the banana peels!

I takes people to achieve goals. Without someone actually doing something (perform), you know for sure that nothing is achieved. And if you are fortunate enough these people they pursuit the same goal as you had in mind. Goals “inform the individual about what behavior is valued and appreciated. This makes the goal-KPI interaction so special. In the next paragraphs I'll discuss some of the possible pitfalls. Again, I’m not saying here that we should abandon using goals. It’s all about being cautious. Setting goals is a difficult and intricate process.

1. Goals focus attention, but goals can focus attention so narrowly that people overlook other important features of a task (called inattentional blindness, Simons and Chabris, 1999). If you want to experience this effect yourself, search for “awareness test” at YouTube. Intense focus can blind people to important issues that appear unrelated to their goal. Combine this with a wrongly choosen goal, and you have a mixture for disaster (e.g. with Enron the goal was revenue setting instead of profit).

2. It’s not uncommon for a company to have multiple goals. Problem is that we humans tend to focus on one or two goals at a time. Furthermore research suggests that some goals are more likely to be ignored than others (Gilliland and Landis, 1992). That why goals in sports are so powerful. It’s most often one single unique objective: win.

3. If management focuses only on the long term and ignores the short term, they will not make it to the long term. If management ignores the long term due to focusing on the short term, there is no long term either. Goals that emphasize immediate performance, prompt managers to engage in short term behavior (e.g. this quarter’s profits). This might result in less investments in research and development. Goals are in this case interpret as ceilings rather than floors for performance (Ordóñez et al., 2009)

4. People are people. Complete with all their emotional ups-and downs. Setting behavior in motion via goals is useful, but can also lead to unpredictable behavior. Research shows for example demonstrates that people motivated by specific, challenging goals adopt riskier strategies and choose riskier gambles than do those with less challenging or more vague goals (Larrick and others). In extreme cases it might even lead to undertake unethical actions and immoral decisions. In the recent crisis in the banking industry there are plenty of examples where this could have been one of the related factors. . Even the smallest action can lead to broad implications. More importantly for our KPI implementation, it might lead people to misrepresent their performance (in a later blog there will be much more on this topic).

Choose your goals wisely!

There is an undeniable interaction between goals and the organizational culture. Management by objectives might lead to focus on the end, rather than the means. Realize that there is always a possibility that goals might not be reached. Depending on the culture promoted this could lead to dissatisfied employees, competition rather than cooperation (silo-thinking) and blaming others. So here are some tips:

• ·       Involve the people who have to achieve the goal (they know best!)
• ·       Create specific goals for different people
• ·       Ensure yourself that the goals can actually be met
• ·       Break down long term goals into short term goals
• ·       Do a pre-mortem: Imagine yourself not having met the goal (what went wrong)
• ·       Be the bad guy for an hour: Imagine yourself sabotaging the goal (what would someone do that doesn’t believe the goals should be met)
• ·       Listen! Listen! Listen! Really listen to people involved in setting the goals

This blog is based on two articles:

“Goals Gone Wild: The Systematic Side Effects of Over-Prescribing Goal Setting” by Lisa D. Ordóñez et al. (2009) and

“Has Goals Gone Wild, or Have Its Attackers Abandoned Good Sholarship” by Locke & Latham (2009)

Next time Step Two: Choose the KEY performance factor that influences your success

Five steps to create a KPI

Since I've started this blog I've been asking around about the usage of KPIs. When I ask people whether the KPI is a goal or a tool they say; No no! It's just a tool!

Really? When was the last time you considered using something else then a KPI to measure performance? Not using KPIs is almost never an option. KPIs are created as easy as emails are written. Consider the number of KPIs that you encounter daily. Maybe KPI adapts won't admit it, but really, the KPI has become a goal in itself. They are created for the sole purpose of creating them.

If creating KPIs is your goal, you'd better have a solid creation process. The next five blogs will be focussing the creation process. How do you create a KPI? And what pitfalls do we encounter when we create one? This blog will focus on the steps needed. In the next blogs I will discuss each step in more detail.

Have a critical look at the KPIs you currently use. Did you develop them yourself? Or were they forced upon you by someone else (your boss perhaps?). Or you might have copied them from another department or found them via Google. Even if you did develop your KPIs, did you follow a structured approach? Here are five steps that you could follow. We will see that each of these steps require you to do research and make some crucial decisions.

1. Determine the goal you want to achieve
In step one we set the scene. Important questions need to be answered. What vision do you have for the future? And what strategy do you have in mind to arrive at this to-be situation? Are there specific goals that you have to meet as part of this strategy? What are the desired results? Are there specific problems you have to solve?

2. Choose the KEY performace that influences your succes
Many factors influence your success. All these factors can serve as a performance indicator. Question is which one is the real key influencer.

3. Develop the indicator that measures the performance
Once the performance indicator has been chosen, you'll have to decide how to measure it. What numbers do you need that can indicate how things are going.

4. Choose the threshold that tells you how you are doing
In the next step you determine when you are happy with the numbers you see. Choose the threshold above/below which your indicator is telling you "All Well!" and at what point it is shouting "PANIC!"

5. Implement the KPI
This is the more practical side of things. Implementing the KPI means that you have to decide about the "look-and-feel" of the KPI. Do you use Excel? A graph? Is it part of a dashboard? How many times will you "run" the KPI?

Next time we'll have a look at step one Determine the goal you want to achieve.

Why do we (really) use KPIs?

As stated in my previous blog, KPIs are used to measure performance. But why are we so fond of KPIs? What makes this tool so popular? In order to find the answer we have to ask ourselves what specific need is satisfied by KPIs.

Let’s start with the most basic need of all living things on this planet: survival. Above anything else, we want to survive.  Many different survival strategies have evolved and we humans seem to be particularly good at it. One of these strategies is to overcome our instincts and make decisions based on our experiences in the past. This strategy is not unique to humans, but our highly developed brains enables us to apply this strategy more intelligently than many other living things. It is good to know that almost all our decisions are made unconsciously. It would be very tiresome if we made all our decisions paying full attention.

Our brains operate as an efficient automatic pilot that is constantly making decisions in split seconds. There is also also a non-automatic brain mechanism that can take over, but it is slower and can perform more difficult tasks that need focus and concentration. The two systems are best illustrated with an example. Do you remember all the decisions you had to make in order to read the first 220 words of this blog? Probably not, but still you understood what was meant. Now try to solve the following puzzle.

You have been given the task of transporting 3,000 apples 1,000 miles from Appleland to Bananaville. Your truck can carry 1,000 apples at a time. Every time you travel a mile towards Bananaville you must pay a tax of 1 apple but you pay nothing when going in the other direction (towards Appleland). What is highest number of apples you can get to Bananaville?

Solved it? Probably not. You might have read it, but decided (somewhere around the word “tax”) to read on and (maybe) try the riddle later. Using your non-automatic brain function is time consuming and tiresome!

In order to execute this extremely difficult task of constant decision making, our (automatic) brain organizes all stimuli in tidy, simple, predictable, and coherent patterns. These patterns are stored in our memory which provides the different brain functions with the necessary background information to make all sorts of decisions. The outcome of the decision is stored and used again later (and so forth, and so forth). So our brain needs information to make all these decisions. The more this information is already structured, the faster it can be processed. The fast brain system therefore loves stereotypes, recognizable patterns (even when they are not there), certainty, confirmations, easy to solve questions, etc.

This sounds like a rock-solid and infallible system, that improves itself by learning and development. But this fast decision making machinery comes with a price. Our brains need to take short-cuts to be this fast. It sometimes replaces complex information or questions with simpler ones just to be able to process it faster. It tries to avoid potentially costly decisions and tends to take the path for which the outcome is the most certain. This makes our (auto-pilot) brain a risk averse decision maker. Furthermore it makes us rather choose a sure thing of less value over something with more value but which is more uncertain. In short, the brain system we use the most is risk averse, loss averse and as efficient as possible.

Now let’s go back to question why we like KPI’s so much. When we use KPIs our subconscious brain is immediately satisfied in many ways. The information provided is structured and someone already used the non-automatic part of their brains to do the hard work (selection the indicator, threshold, visualization, etc). KPIs are most often visualised and easy to interpret (using dashboards, graphs and traffic lights). They give the illusion that we can reduce the complex world to simple, tidy and coherent patterns. But most of all it provides us with a ready-to-use risk and loss avoidance toolkit. KPIs suggest that we understood the past and therefore are able to predict and guide our decisions. Decisions made on KPIs give the impression that we can avoid uncertainty, foresee risky events and prevent loss. In other words, the KPIs fulfill our needs and serve the decisions on a silver platter. No wonder we can’t get enough of KPIs!

Coming up next time: We're going to make a KPI!

Answer to the riddle: 833 apples.

• Step one: First you want to make 3 trips of 1,000 apples 333 miles. You will be left with 2,001 apples and 667 miles to go.
• Step two: Next you want to take 2 trips of 1,000 apples 500 miles. You will be left with 1,000 apples and 167 miles to go (you have to leave an apple behind).
• Step three: Finally, you travel the last 167 miles with one load of 1,000 apples and are left with 833 apples in Bananaville.

Want to read more on the different systems in our brain? Read Thinking, fast and slow by Daniel Kahneman. An easy to read book on the mechanisms behind reasoning and thinking.