To KPI Everything Is to KPI Nothing
As the familiar axiom goes, to measure everything is to measure nothing.
Mark Twain once said he it would take him 30 minutes to prepare a one hour talk, a day to speak for twenty minutes, and a week to prepare a five minute talk.
Getting to simple is one of the great challenges to working with information and to guiding actionable inquiry. The simpler you want to get, the more work it is to reduce. Someone once described this challenge as the journey to "simplexity," an appealing term for the challenge of simplifying a complex context.
So how do you get to simple? What questions should be satisfied during the design phase? What framework can we evaluate a potential KPI with?
Here are six problem areas to address before designing an executive dashboard or selecting KPIs. (And they are pretty helpful for every other kind of dashboard, too.)
Beyond "Autopsy Data" and into Actionable Insight
Do the metrics you are considering for your dashboard provide targeted insight into the fundamental levers of the business model?
If your business was struggling, would your core CEO metrics reflect the problem areas? Or do they only show the secondary financial impacts? Low margins, sales, revenues are critical, but they don't provide much visibility into why they are low.
Look for the strategic levers that create target outcomes rather than the outcomes themselves. You're trying to see the shape of future revenues rather than rear-view window "autopsy" results. If you pinpoint what drives your business, then you can address challenges early and maximize what's working well.
Your Business Model - Squirrelly? Or Stable?
Here's a tough question: is your business model a stable, known entity?
Can your metrics be mapped to the target customer, value proposition, monetization approach, and key resources, activities, and costs? If your business model isn’t a defined (and, let's hope, documented) approach - it’s likely that the metrics required to support the business will "shift and drift."
A great test of the stability of the business model is simply to ask the leadership team if they can describe it on a whiteboard. "Show me how the business model works?" If the different answers and disconnects astound you, then you may not be ready for an executive dashboard. That's okay. But stop.
You've discovered the alignment challenge more than half of companies struggle with.
KPI Ownership - Now, Who Exactly Is Supposed to Fix It?
Are the metrics on your dashboard owned by specific individuals?
Do they lead to specific conversation with specific people? Or do they float ambiguously around a vague set of owners? Disappointing revenues are a problem, but they have no clear owner (well, the CEO, of course) - but a decline in resource utilization, for example, likely has an owner. Ditto with application functionality that isn't being used or cost overruns.
Before adding a KPI to a dashboard, make sure you have a name (or role) associated with it.
The 27 Things I Really Care About (But Can't Remember)
Are you focusing on a small, clear set of metrics?
Most individuals can only focus effectively on a small set of priorities. Beyond this focused set, the chance of being effective with any of them is significantly decreased. OKR visionary John Doerr puts the number as low as five for individuals. If you can't remember what you're counting, you might have too many.
If you already have an executive dashboard now, how many KPIs live on it? Without looking, how many can you name?
This is equally true of organizations. To be truly effective, you need to be focused.
If You Wouldn't Tell a Potential Investor, Then...
If your chief executive officer only focused on the questions on the dashboard, would the enterprise still have the core strategic guidance it needs?
If your CEO had two minutes to pitch the business for sale or investment, would the questions targeted on their dashboard be critical to her pitch? Look for that level of connection to the business model.
The CEO should be focused on the bedrock of the business - and his team should bring that business model to life.
Can your core metrics can’t be understood by the vast majority of employees?
If they can't, and the measurements are complex or arcane, then the chance of responding to them is low. Complicated ratios and calculations may produce meaningful numbers for sophisticated analysts, but they are less likely to produce meaningful actions from others. Find reasonable simple numbers that are powerful proxies for fundamental business needs.
And let's face it: it's hard getting to simple. It's complex. And it's even harder bringing leaders on that journey without adding their own complexity to the solution.
But "simplexity" is the art that makes for a powerful dashboard - and a framework for alignment in leadership and a shared vision of what really matters for the organization as a whole. Get those numbers right, make them simple, repeat them till they are in your bones - and watch the organization flourish.
But don't start a dashboard for the CEO till you've wrestled things down to simplexity.
What is all of this getting at?
The Executive Dashboard Starts Upstream of the Data
Everyone loves building dashboards and identifying KPIs, but the process of defining powerful CEO metrics is a business challenge that starts well upstream of data and KPIs themselves.
Early on, the majority of your effort should be focused on how the business works. This preparatory business definition will generate clear metric accountability and ownership for the most critical questions in the organization.