Yesterday was a big day. The entire company was assembled in the auditorium to listen to the executives present the strategy for next year. The excitement and energy in the room were so high that it gave you the chills.
The presentation, delivered by the CEO and other senior leaders, lasted over three hours and was super engaging.
They covered what we had accomplished over the last year, and you felt proud
They talked about some of the challenges we were facing and you knew that you and your team could make an impact
They also reinforced the core tenants of our culture and you felt reconnected to the values you hold dear
You left the room pumped and remembered why you were so proud to be part of this amazing company: the purpose, the culture, amazing colleagues (and free snacks :) ).
This morning you arrived in the office feeling like a million bucks and first things first, you sat down with your team to debrief the strategy presentation and the implications for your team’s priorities.
After an hour of conversation… the excitement was gone, the motivation was shattered. It became clear that the team was struggling to distill down the implications of the strategy exposed just a day before. But even worse (in your mind) you realized you couldn’t do better.
Yesterday everything seemed so clear. The CEO talked about growth targets, revenue numbers we had to hit, profit margin we had to protect, and efficiency improvements that needed to be achieved.
Yesterday you felt like you understood everything… yet today you are feeling overwhelmed... there are so many ways to achieve those results.
And that’s the problem, to hit those KPIs there are indeed so many things we could do, how do we know what to focus on?
That’s one of the symptoms of the KPI trap.
The KPI trap… or the illusion of a Direction
To get straight to the point, the trap is set when a company Direction (or vision) is described through a set of KPIs (that you care about) instead of a set of outcomes (that your customers care about).
The reason why a company spends time on creating a strategic Direction is because it comes with a promise. The promise to bring (among other things) three key benefits:
Internal alignment enabling teams to execute toward a common goal
A source of inspiration and motivation for people in the organization
And a compass to help focus and guide day to day decision making
While KPIs give a sense of control and clarity it is important to realize that KPIs are NOT outcomes. KPIs should not be the Direction, they should be defined by it.
Let’s look at an example.
If your company was an airline with only one plane, a Direction could be to “provide top-notch overnight flight service from Paris to Chicago 10 times a week, to business travelers who want to be ready to work when they land” (that’s a long one).
In that case, some KPIs would include speed, fuel consumption, actual position relative to ideal route, availability of meals, individual video system failures, traveler satisfaction during and after the flight, ticket sales, average ticket price, capacity utilization, in-flight wifi connectivity, and a ton of others.
Now imagine these alternative visions:
“Always ready to fly for top government officials”
“No hassle flights for families with young ones traveling internationally”
IYOV (Imagine Your Own Vision)
While the visions here are totally different, many KPIs would still apply, some would need to be adapted, and some would be added or removed.
However the way the service would be executed, regardless of KPIs, would vary widely depending on the vision.
The point is that while KPIs enable us to deliver on our promise to our customers, and as such are critical tools for us to win in the short and long term, they lack what a strategic direction should provide.
They aren’t effective tools to drive internal alignment, foster creativity, create focus, help teams deal with ambiguity, or inspire.
In fact, when misused (or weaponized) they have the potential to derail a team or an entire organization, for example by trading long term success for short term gains.
The path of least resistance
So why do teams and organizations get pulled into the KPI trap? Why is it so tempting to describe a Direction in term of KPIs?
Because KPIs are the language of business.
That's a language that managers and employees use every day. A language that media, analysts and investors understand to evaluate and comment on companies' performances.
KPIs can be put in spreadsheets.
KPIs don’t need to be articulated, they aren’t polarizing, they don’t lead to passionate debate and aren’t subject to interpretation (for the most part).
In short, KPIs are easier
Side note: the more a company or team is under pressure and influenced by parties that don’t have an intimate understanding of the purpose and vision (the stock market anyone?), the stronger the trap’s gravity pull is.
How to avoid the KPI trap
Here is a rule of thumb to know whether or not our organization may be caught in the tractor beam of the KPI trap.
If we presented the strategic Direction to our customers, what would their reaction be? Would they care? Would they understand it? Would they get excited?
If we can’t confidently answer “yes” to those questions, then we may be caught in the KPI trap. We don’t need sophisticated surveys or focus groups to find the answer, if we know our audience, which we should, we know it in our guts.
Typically our customers don’t care about our KPIs, seriously... they don’t care about our growth targets.
What they care about is how we will make a difference for them. KPIs don’t change the world, they merely measure how the world that our customers care about is changing.
So what? What’s the alternative?
For a strategic Direction to deliver on its promise, it needs to be articulated in the form of customer-focused outcomes
Articulating that kind of Direction is hard because it requires leaders (at the company and team levels) to take the time to clearly articulate the vision and support the distillation process (to reach every layer of the organization).
It means we have to convince, communicate with passion, get people excited, and get them aligned. A vision can create passionate reactions, for or against it, and that’s what makes it so powerful.
Why? Because done well, a strategic Direction expressed through a set of customer-focused outcomes will:
Create focus: because they need to be communicated through very vivid and concrete descriptions. Doing so provides teams with a crystal clear picture of what “winning” looks like, which reduces distractions by focusing energies on what matters for customers, away from internal matters.
Create alignment: customer focused outcomes can be polarizing, which leads to healthy conversations within the organization, those conversations naturally lead to alignment. On top of that, outcomes can sometimes be very nuanced, forcing leaders to explain, clarify and convince, which also drives stronger alignment.
Inspire and Motivate: for people working in organizations that are purpose driven, there is nothing more motivating than seeing how our work will change the world. By describing the impact on customers' lives and painting a vivid picture of the mountain we are trying to climb, leaders fuel intrinsic motivation, inspire teams and boost creativity.
Empower teams to make ambiguous decisions: assuming we want highly effective and empowered teams, we need everybody (and I mean everybody, not just managers) to make needle moving decisions on a daily basis. Some decisions will be straightforward, but many will be ambiguous. A strategic Direction expressed through customer focused outcomes can become a powerful internal compass enabling individual contributors and leaders alike to make ambiguous decisions autonomously.
What’s a good example of such a vision? In my opinion, Elon Musk’s blog post: Master Plan, Part Deux, is a great illustration.
Bringing everything together
I’d like to make something clear. KPIs are important, super important… if used well.
KPIs measure our success, they force us to establish a clear definition of what "winning" looks like and provide a critically important feedback loop, one that is based on objective facts and data. They enable us to make data-informed decisions.
However in the plane analogy, what matters to travelers is to get from Paris to Chicago, they don’t care about the plane’s fuel consumption.
If we are operating the plane, fuel consumption, alongside a ton of other KPIs, is critical to deliver on what our customers care about and to succeed as a company.
A clear vision expressed through customer-focused outcomes that have been debated, discussed, explained will lead to highly motivated, super-aligned and laser-focused teams that will make thousands of decisions every day and will move the organization toward the desired strategic Direction.
My question to you is: what guides your decision making today? Is it a dashboard and a set of KPIs, or is it a vision that would get your customers excited?
If not the latter, I’d encourage you to pause and articulate your strategic Direction through customer-focused outcomes. Then look to identify a set of relevant KPIs that will enable you to track your progress against the goals stated in your vision.