Key Performance Metrics That Are Missing the Mark

Author: Jason Kearns, VP of Technical Services

“What gets measured gets done.”

It’s a tale as old as time. A universal truth that holds immense power. Power that must be wielded carefully. OK, that’s a little dramatic. But if you’re like me, you’ve come to realize that performance metrics are all around us. Every time we interact with a business, there are motivating factors at play that we can’t see—but that doesn’t mean they aren’t there.

Key performance metrics, or KPMs, are meant to drive performance toward the ultimate goals of the organization. Most organizations care deeply about stock price, revenue, growth and profits. These financial benchmarks are easy to measure and are indicators of organizational success. However, they are lagging indicators: they measure the actual results, and are hard to improve upon quickly.

KPMs should ideally serve as leading indicators, allowing us to measure behaviors that will lead to long-term success. A leading-indicator KPM could be the number of patent applications for a tech firm or the number of positive results on a customer satisfaction survey.

On the individual level, leading-indicator KPMs are even more task based and succinct. For sales, they could be how many calls a sales rep made, how many meetings they secured and how many proposals were sent out. None of these items count toward quota, but they will someday lead to sales. Or that’s the idea.

The most important aspect of KPM development is selecting the right KPMs. This is where my daily life gets interesting. I continually observe workers clearly making the wrong decisions regarding the business, and I can’t help but assume that some of the KPMs driving their choices are simply missing the mark. Let’s look at some personal observations by industry.

Retail

Have you ever tried to visit a shop right before closing time? Sometimes the business will close a few minutes early and turn you away; other times the employees will keep the store open if customers are still showing up. Common sense tells me that the latter is better for the bottom line.

So why do some businesses turn you away? Probably because those employees believe they are judged more by their timesheet than anything else. Either that, or they simply aren’t motivated by sales at all and they just want to go home. Either way, a customer being turned away means lost sales and lower customer satisfaction. What are the chances that this customer comes back?

A KPM that stresses timely closing procedures above all else can sometimes lead to bad business. That’s missing the mark.

Airline Industry

I fly a lot, and I’ve had vastly different experiences from one airline to the next. It’s been very clear to me over the years that KPMs are not recognized universally. Take the on-time statistics tracked by the government. This is a measure of flights that experience a delayed departure. This sounds reasonable, and many airlines clearly focus heavily on improving their score. There are even awards given out to airlines that achieve top ratings. However, one airline clearly doesn’t care (which is a good thing): Southwest Airlines.

I have been on countless Southwest flights that were held at the gate for late-arriving passengers. When passengers are connecting from other delayed Southwest flights, the gate attendants know about it and hold the plane. I’ve even seen a passenger onboard alert a flight attendant that a coworker just called and was held up in security. To my amazement, the crew opened the door and waited. Conversely, I’ve been slightly late and left behind no less than three times in the last year by a United Airlines crew. Everyone has experienced running up to their gate only to see a closed door. The feeling of seeing your plane idling in front of you—and yet you can’t get on it—is unforgettable.

So why does United clearly care about on-time departures while Southwest does not? Well, which is more important? Which KPMs lead to actual company performance improvements?

Airlines compete primarily on three fronts: price, route availability and customer experience (usually in that order). A front-line employee is really only able to influence the customer experience, and this influence can only be measured over time. So what do customers care about? Personally, I’d say getting to my destination on time and making my original flight. Nobody likes to go through the rebooking process.

Clearly, Southwest has decided that getting passengers through on their original flights is a priority. Consequently, they’ve also determined that on-time departure is technically less important—especially since you can leave late and still arrive on time, which is really more critical to passengers anyway.

So a KPM such as on-time arrival would trump on-time departure. And a KPM such as re-bookings (the fewer the better) would help the airline hit the mark. I don’t know for certain that Southwest is using these metrics, but their front running company performance indicates that they are doing something different.

Conclusion

So what lesson can be taken from all of this? That what we measure gets done, for better or worse. We must be diligent in making sure our KPMs directly lead to the outcomes we want. Otherwise, we could end up achieving “excellence” at the KPM level while hurting our overall business performance.