MARKET | Apr 19, 2018

Selling KPIs

What if the "problem" of vendors in complying with Key Performance Indicators was to become a competitive advantage?

I’ve been going to a gym regularly for a few months now. I’ve engaged a personal trainer who gives me instructions on exercises and nutrition, and periodically sees me to check if I’m reaching the results she expects me to achieve because I follow her instructions.

Every time we meet, that is about once a month, she “measures” me, and does some processing of figures that she has tried to explain to me – not to convince me of their validity, but just to explain them – and about which I’m not required to express judgment or opinion (which I obviously have); she then gives me a printed page where a percentage is shown in large numbers in the upper right-hand corner. This percentage is my muscle mass in relation to my body mass. To the side, in small, italic numbers, a further percentage appears that represents the value I should be aiming for, or rather what the result she finds for me should be.

I’d like her to ask me what exercises I’ve done and how long I’ve trained, I would like her to measure the effort I put in instead of the result, but there’s no way, she looks at that number. So when she gives me the card, I also look at that number: only that number. The rest is of no interest. I fold the sheet, looking sideways at her expression to capture some kind of judgment. Generally speaking she is unhappy, she tells me that I’m not doing enough, she tells me “we’re not there” and it’s clear that she expected more: all because that number has not changed since the last time we saw each other, or at least it has not changed enough. I wish I could say instead that I’ve done a lot. And I would like to be able to ask and ask again one question: what am I doing wrong? What do you suggest? But it would be useless: her answer is already down in bold print at the bottom of the page: “If you don’t improve, you’re doing something I told you to do wrong”.

Performance measurement: the history

The propensity of human beings to measure has very ancient origins.The Lebombo bone is probably one of the oldest artifacts of mathematical use ever made by man: it consists of a baboon fibula marked with 29 clearly defined notches. The find has been dated to 35,000 BC. Measurement in itself has developed over time and has become a basis for different types of evaluation. In the 18th century, in order to highlight the relationship between the characteristics of Ignatian education and his spiritual vision, Ignatius of  Loyola imposed twenty-eight  fundamental characteristics divided into nine sections which Jesuit schools had to have, and gave an indication to evaluate them continuously.  In management, from Luca Pacioli in Venice in 1400 to Norton and Kaplan in 1992, performance measurement became a tool for governance and control, and the focus shifted on the one hand to the importance of what to measure and on the other to how to ensure that measuring and evaluating can be transformed into tools that support the pursuit of defined strategies and continuous improvement. Today the practice of of setting and continuous monitoring of Key Performance Indicators (KPIs) for governing organizations of all kinds is a matter studied and applied by most executives and managers (cfr The KPI Institute).

What are the areas in which measuring is strategic?

An absolutely interesting area of KPI ​​use is procurement and given that strategic use of authorized suppliers is now an essential prerequisite for successfully managing the entire Supply Chain, in recent years the procurement area has seen a rise in its importance for controlling some pillars of business competitiveness, such as: product quality, price/cost and level of service provided (Stabilini, 2005).

The phenomenon is very often analyzed from the point of view of buyers: the focus is on the importance of defining, on the one hand performance indicators and on the other targets for the measures selected that become a condition of payment, if not also of continuation of contractual activities (SLAs) for vendors. These latter very often perceive all this as an imposition and most often do not bother to interpret and understand the need for process that buyers express in this form.

The effect can be devastating and generate buyer-side dissatisfaction and vendor-side frustration. I frequently work with organizations that have to define their own contract facilities in the IT projects and services area and ask for consultancy support to define an effective measurement system that is a vehicle for them to achieve their corporate quality levels, and at the same time I very often operate alongside working groups that are required to comply with the contractual conditions desired by buyers. The contractual system, which originates from absolutely healthy principles, often seems not to work as expected.

Some reflections for the vendors

Selling KPIs is an opportunity
First of all, I think that KPI/KPO systems and associated SLAs that buyers submit to us should be interpreted as opportunities. In the past, the purchase of IT projects and services was often done in days/person provided or in deliverables released. Both modes placed limits on us and allowed those who buy to request specific professionals, to want to have them at their offices, to refuse some deliverables and some modes of service arbitrarily, to not consider specific deliverables adequate on the basis of non-objectifiable opinions. By selling “free” KPIS, vendors give all of this and allows us to operate as best we can with the sole objective of satisfying what the customer wants to have and that is represented by the value that some indicators must take.

Selling KPI successfully involves understanding the need of the buyer
In order to make the most of this situation of “freedom” and at the same time make sure that the customer is fully satisfied, it is important to pay attention to the reasons that led the buyer to formulate certain indicators and associated targets. Behind the contracting of projects and services through agreement on specific levels of performance, there are generally customer processes that must function as a whole with certain levels of quality and the outsourced parts must necessarily be aligned and contribute to the overall result. We vendors must make the effort to understand how the work we do fits into the overall process of those who buy

Selling ​​additional and possibly dynamic KPIs
In this context, we vendors can radically change the way of “selling” and definitively distinguish ourselves as “generators of quality”. We can be proactive with KPIs, offer ourselves first to work for KPIs, offer additional KPIs and suggest that those who buy carry out activities and create products by offering the “achievement” of target values ​​for specific performance indicators chosen after having adequately interpreted the needs of the buyer. We can suggest indicators that vary over time according to the requirements of the specific contract, dynamic indicators which measure different phases of work: in any case, we have the huge opportunity to sell what most customers ask for, which is achieving “their performance”.

Selling KPIs involves self-measuring ourselves with these KPIs
The context is a stimulus to a further desired step: that the vendor self-measures him/herself through a KPI/KPO system that can on average be interesting for buyers and that constitutes a proactive contractual basis. I think that instead of waiting for customers to formulate their own KPIs and SLAs, vendors – by virtue of the fact that they subject their structures to continuous quality measurements – can offer what they do and are. The formula of “self-regulation in line with the needs of customers” is the best way to increase efficiency, work on continuous improvement, learn from the customer and eliminate the aforementioned frustration.

“If we want to be in control of our happiness, we should be in control of our performance”

Aurel Brudan, CEO of The KPI Institute, writes: “While happiness can represent many things to many, a common expression of this feeling is the result of the purposeful achievement of a desiderated. Achieving something we want, while shared with others, is about us and reverberates strongly in our inner self. Transposing this powerful catalyst of performance in both our personal and organizational lives is facilitated by a new paradigm: happiness is driven by achievement. Achievement is an expression of performance. If we want to be in control of our happiness, we should be in control of our performance”.

In my view, this quote is the best conclusion to these reflections.

Maria Cristina Barbero