Developing KPIs Executives Use

Developing KPIs Executives Use
Developing KPIs Executives Use
Written by Heather L. Cole, June 16th 2022

Key Performance Indicators (KPIs) can be more challenging than people think.   You create a Cognos or IBM Planning Analytics dashboard with the KPIs the company has been measuring and no one uses it.  People convince you to change the dashboard and someone else complains that it’s not meeting their needs.  As an analytic professional you start to feel like you are caught in the middle of a tug a war.  Today we will share Lodestar’s recommendations on developing KPIs executives use so you don’t get caught in the middle.

KPIs and the Strategic Goals

In last week’s blog, Create Support for KPIs Across the Organization we discussed that when defining KPIs you need to first start with the strategic goals of the organization, then ensure that you are engaging the right stakeholders from the very beginning and finally communicate the WHY.  If you did not read it go read it now, so you understand why strategic goals are so important in defining KPIs.

Steps for Developing KPIs for Cognos or Planning Analytics

  •  Start with Understanding the Strategy Goals and Initiatives of the organization
  • Define the stakeholders, the people that the organization needs to have strong relationships with to succeed. 
  • Facilitate a KPI discovery session (Facilitating Analytic Discovery for Success)
  • Define what you can monitor to make the relationship with the stakeholders stronger
  1. Ask the stakeholders themselves
  2. Engage your end users so they feel part of the process
  •  Identify your data needs & evaluate if you already have it
  1. IBM Planning Analytics can be a useful tool for calculating and collecting data you might need.
  •  Validate the measurement definition, calculation, and frequency
  • Share the WHY for the KPIs with the organization
  • Define how to communicate your KPIs 
  1.  Cognos and IBM Planning Analytics could be useful tools
  •  Review your KPIs quarterly to ensure they help improve performance

Common KPI Mistakes

Now that you have the basic steps, I want to share the common mistakes that can jeopardize your company’s future.

Not Evaluating Your KPIs Regularly

In the last 3 years the world has changed, your business has changed, and yet so many companies are still using the same dashboards and measures they defined years ago.  KPI’s are not intended to be static they should change as your business changes, as your employees change, as your suppliers and customers change.  At Lodestar Solutions, we coach our clients on hosting quarterly or at least semi-annual strategy sessions to identify how your Cognos Dashboards, KPIs and Planning Analytic models should change.  To learn more about hosting meetings check out our blog, Facilitating Analytic Discovery for Success.  

“What got you here won’t get you there!” 

Measure Everything

Another mistake is to create too many KPIs.  Hint the name says it all, they are Key performance indicators.  Not All performance indicators.  Start with what you believe best monitors the relationship with your stakeholders (as described in previous blog).  We are looking for the needle movers.  Things our teams can take actions on to improve the performance.  When you measure too many things, people don’t pay attention to any of them.  Remember if you are hosting regular strategy sessions you can change them.  Less is more.

Tying Bonuses to KPIs

Be very careful if you tie bonuses and incentives to performance on KPIs.  According to technology thought leader Bernard Marr, “The true purpose of a KPI is to help people inside the business know where they are in relation to where they want to be.  They act like a compass on a sea voyage.  But, once those KPIs are linked to incentives, they stop being a navigation tool and become a target an individual has to hit to secure their bonus.” 

I have seen this firsthand.  Prior to the real estate bust, I was working with a large Chicago home building designing an IBM Planning Analytics model.  Just prior to the crash we noticed that the number of spec homes was increasing significantly, which was odd as spec homes are the models used to help sell houses.  When we asked the CFO about it, he said, oh yeah that’s because we have had people back out of closings.  He then added we pay our project manager based on completions, so they keep building.  Fast forward the billion-dollar home building is no longer in existence.  I believe the warning signs were there, but the company didn’t act fast enough to change how people were paid.  Foundation Crumbles on Kimball Hill homes.

Get an Analytic Success Coach

Success leaves clues and there is a methodology of developing the KPIs executives use.  The above gets you started but if you want rapid success you may want to consider getting a coach to guide your thought the process.  Yes, there are analytic success coaches!  At Lodestar Solutions we work with clients to empower you and your teams to successfully facilitate analytic strategy sessions.  If you would like to learn more about how a coach can help you achieve success in weeks not years, email us at services@lodestarolutiosn.com.

Create Support for KPIs Across the Organization

Create Support for KPIs Across the Organization
Create Support for KPIs Across the Organization
Written by Heather L. Cole, June 9th 2022

Are you struggling with standardizing a common view and in some cases defining the KPIs for your organization?  Are you feeling like you are dealing with the “flavor of the day” where only the teams promoting the KPIs use them?  Well, you are not alone!  Today we will share tips on how to create support for KPIs across the organization.  Next week we will share additional tips to develop the KPIs.

Creating Support for KPIs

To gain support for your KPIs you need to first start with the strategic goals of the organization, then ensure that you are engaging the right stakeholders from the very beginning and finally communicate the WHY.

Start with the Strategic Goals

For KPIs to be effective they should reflect the strategic initiatives of the organization.  I am always amazed that when I teach business intelligence and analytic courses, I survey the audience and ask, “How many can clearly articulate the strategic goals of their organization?”  Amazingly less than 4% of the attendees raise their hands.  Think about that.  Assume you were having a soccer tournament that had 8 teams registered.  Each team had 15 players (11 players and 4 substitutes) so there were 120 players registered.  Now assume that of the 120 players only 5 of them knew what goal to shoot on to score.  Is anyone else picturing a tournament of 4-year-olds?  

If you don’t want your business run by 4-year-olds, you MUST first make sure everyone especially the analytic professionals know the strategic goals of the organization. 

Stakeholders

The next step is to ensure you are engaging the right stakeholders.  But how do you know who the key stakeholders should be?

Start by looking at the strategic goals.  Who is your organization serving?  Typically, it’s our customers, employees, suppliers, and shareholders.

According to Graham Kenny in his blog, Create KPIs That Reflect Your Strategic Priorities 
in Harvard Business Review,  “The first step, clearly, is to identify the key stakeholders of your organization or strategic business unit. Understand that your relationship with each is a two-way street, then develop measures on both sides of those relationships.”  For example, a distribution company’s stakeholders may be employees, suppliers, and customers.  The stakeholders are people that the organization needs to have strong relationships within order to succeed.  Mr. Kenny says, “measuring performance is measuring relationships.” 

I absolutely agree with this philosophy, but many organizations make the mistake of assuming they know what their customer, suppliers and employees want out of the relationship.  They never stop to ask the stakeholders what they want.  By connecting with the stakeholders like employees you will be able to better define the KPIs that need to be measured to help retain talent. 

By designing your KPIs to be aligned with the strategic goals and providing visibility on how you are serving your stakeholders from both your perspective and theirs you will naturally be able to get your teams to see the value of the KPIs.  But this may require executives and managers to educate their teams on the WHY!  

As my favorite author Simon Sinek says, “People don’t buy WHAT you do, they buy WHY you do it.” Simon Sinek, Start with Why: How Great Leaders Inspire Everyone to Take Action.

Leverage the Power of Consistency

I would be doing you a disservice if I did not share with you one of the most powerful ways of increasing adoption of your KPIs, and dashboards the Power of Consistency.

The Power of Consistency is one of 7 principles of Influence developed by Dr. Robert Cialdini, the Regents' Professor of Psychology and Marketing at Arizona State University and Distinguished Professor of Marketing in the W. P. Carey School.  When used correctly consistency can increase adoption and usage of your KPIs and therefore help the organization achieve the strategic goals faster. 

The first step to consistency is to engage people in the development of the KPIs. “Consistency is a principle that asserts that people want to be and to be seen as consistent with their existing commitments," says Cialdini. 

You start with small steps. For example, you could ask people to create a list of items they would like to see measured as a KPI.  By just asking them to create a list they are taking a small action toward your initiative.  Once that have taken a small step, they are more likely to take another step, and another.  They are also more likely to support a project they feel they have participated in creating even if their role is minimal. 

“You don't create a commitment inside people that they don't already have," Cialdini explains. "But you can look for commitments that they've already made, and then you can align your requests with that, so what you're offering them gives them precisely what they're looking for in a business partner.”

Action Steps

Now that you understand how to create support for KPIs across the organization by clarifying the strategic goals, then identifying the stakeholders, communicating the WHY to the teams and finally engaging people in the process, it’s time to act.

  1.  Validate the strategic goals for the organization.
  2. Create a list of stakeholders.
  3. Ask the stakeholders what they want out of the relationship with your organization.
  4. Create a survey of team members asking their opinion on what KPIs are important.

Remember Small Steps are the key to success. 

IBM Planning Analytic and Cognos Clients

Did you know IBM has amazing tools for monitoring your KPIs?  To learn more contact us at Services@lodestaresolutions.com and visit our blogs:

Scorecards and Metrics in Planning Analytics

Scorecards and Metrics in Planning Analytics
Scorecards and Metrics in Planning Analytics
Written by Mike Bernaiche, September 30th, 2021

Did you know that you can track your key performance indicators (KPI’s) with Scorecards and Metrics in Planning Analytics?  Many people do not realize that Planning Analytics has built in functionality to create the highly visual scorecards and metrics.  A while back the only way to create these up or down arrows or the red, yellow, green indicators was through Metric Studio in Cognos BI.  IBM moved this functionality into TM1 with the use of Performance Modeler and today you can create charts like the above along with visual maps or flow charts to track all your metrics.

What are Scorecards and Metrics in Planning Analytics?

Let’s start with the basics.  IBM Cognos Planning Analytics Scorecards and Metrics integrates scorecarding and strategy management capabilities to provide better integration of performance management with planning.

This allows you to:

  • Visually capture and monitor organizational strategy and goals
  • Define and monitor your key performance indicators (KPIs) with traffic light and trend icons
  • Compare your KPIs to corporate strategic goals
  • Create interactive scorecard diagrams and data visualizations

Components of Metric Cubes

Metric cubes are made up of the following:

  • Metric dimension
  • Metric Indicator dimension
  • Metrics cube
  • Impact diagram – auto created with metric cube
  • Strategy map
  • Custom diagram
  • History chart - - auto created with metric cube
Metrics Cube

Metric Dimension Properties

Metric dimensions are made up of the follow properties that need to be set:

Format property

      Specifies the numerical or date/time display format.

Performance Pattern

      Above target is favorable

      On target is favorable

      Below target is favorable

Tolerance Type

      Absolute - the value in the tolerance indicator is the tolerance and is used as-is.

      Percent - the value in the tolerance indicator is used to calculate the tolerance as a               percentage of target.

Tolerance Type

Metric Diagram Types

There are four types of diagram types that can be used with scorecards and metrics.

  • Impact diagram
    Impact diagrams visualize the positive and negative relationships between the metrics in your metrics cube.  This type of diagram shows how the business actually works by displaying how one metric influences another.
  • Strategy map
    A strategy map is an industry standard visualization that tracks business performance by perspectives, objectives, and metrics.
  • Custom diagram
    A custom diagram is a strategy map where you import a custom image and show metrics with dimensional context onto the image as data points.
  • History chart
    A history chart shows a column chart of data for a metric.

For even more information on scorecards and metrics from IBM check out this link, Understand Cognos TM1 Scorecarding - IBM Documentation.

IBM Planning Analytics and Transformational Planning

Recently we started researching and developing a program to teach clients transformational planning.  Heather Cole recently wrote in this blog, It’s Time for CFOs to Leverage Transformational Planning - Lodestar Solutions “the world has changed. Organizations of every size are being forced to rapidly adjust to the new world where distribution challenges are the norm and employee retention is top of mind. The uncertain world is forcing companies to create a transformation strategy. I believe this needs to start with the CFO. It’s Time for CFO’s to Leverage Transformational Planning.”

I couldn’t agree more with these words and believe that scorecards and metrics in Planning Analytics can help take you to transformational planning in your organization.

Here is another blog from Heather that further talks about getting on board the transformational train before some else does.  Finance Must lead Business Transformation Before Someone Else Does - Lodestar Solutions.  Also, inside this blog is a place to register for our free webinar titled - Mastering Transformational Planning: Why CFOs Should Lead this Initiative?  This webinar is on Thursday, November 18th, from 10:30am-noon Eastern.

In this free webinar you will discover:

  • Why every CFO must discover and lead Transformational Planning
  • How to identify where the quick wins are in your organization
  • How to move your organization to Transformational Planning
  • How to find more time for Transformation Initiatives

If you have any questions regarding the webinar or scorecards and metrics in Planning Analytics, please reach out to services@lodestarsoltuions.com.

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