I recently had the chance to sit down with TARGIT Decision Day keynote speaker David Parmenter over Skype. While getting to know the man behind the King of KPIs, I learned a lot about what drives David to help companies around the world change the way they monitor their business and why he finds it so important.
I’ve printed our conversation below so you can get a little sneak peek at all that David’s sessions have to offer.
TARGIT: What was it that sparked your interest in KPIs and your passion in helping businesses perfect them?
Parmenter: My real Eureka moment happened on an underground tube in London while working overseas as an accountant. I was reading the paper and in it I read for the first time the story I often quote about how Lord King remade British Airways by focusing on a single KPI. I couldn’t believe a single KPI could make such a transformation in a company. Over the next five years, I started to realize that the answer to what a KPI was and was not lay within the British Airways story. So I started to analyze, talk, and write about it. During this time, I came across a couple of other things. The KPI Manual, written in Australia, being one. I came across other work about the balanced scorecard that confused me. I knew a balanced scorecard wasn’t the answer. That’s when I started writing my book and the formulation and methodology that has been with me for 10 years now.
TARGIT: How and when did you first realize how wide-spread the misuse and mislabeling of KPIs was in the business world?
Parmenter: I was incredibly confused with [Robert] Kapman and [David] Norton’s work [the balanced scorecard]. I prided myself on being able to make complex things simple and I couldn’t come to grips with this. I realized maybe it wasn’t me; maybe it was the balanced scorecard methodology. And after a lot of research, I realized the balanced scorecard was doing companies wrong. It was like a table without legs: you can use it but it’s not really working. At that time, the [South African] government was recognizing we must get into KPIs. The treasury was looking at KPIs, but it would have been easier to land a rocket on the moon than to put KPIs in place the way these governments wanted to put them in. People were making it far too complex. I was baffled at how someone could implement what these organizations were talking about. I could see that they knew what they wanted to do, but now how to do it. Soon I realized no one had actually worked out the characteristics of what a KPI actually is.
TARGIT: You’ve written about several instances when performance monitoring created unfortunate unintended results for companies. Is there a simple way for management to accurately measure performance and incentivize employees without risking backlash?
Parmenter: Every performance measure has a dark side. If the unintended consequence is greater than the benefit, get rid of the KPI. You want a KPI that is greater than the dark side. Always assume that every KPI has one, but find the one with the least. Estimate it, measure it. Lots of KPIs are being used with a dark side greater than the benefit. I always say you must never pay people according to their performance in relation to KPIs. As Jack Welch said, high performance is “a ticket to the game.” You’re expected to have high performance. If you can’t get planes arriving and departing on time, you shouldn’t be working for British Airways. We aren’t going to reward you for that. We will, however, pay you according to certain measures of overall stats comparing your performance with that of your competition. You’ll know if performance is good or bad, but you won’t get paid according to a set target. Once you pay someone for a KPI, it becomes a Key Political Indicator. People will manipulate their figures so they can manipulate their pay.
TARGIT: What are the top three lessons you hope attendees will take from your Decision Day sessions?
Parmenter: First, a clear understanding of what a KPI is and isn’t.
Second, an understanding of how to go about finding KPIs. That’s an understanding of your organization’s critical success factors. An organization only knows this when there’s a list hanging on every wall. Then employees can plan the day based on the amount of time spent on those areas. Those are the origins of all KPIs: If a performance measure doesn’t have its origin here, it’ can’t be very critical and therefore why are you measuring it?
Third, an understanding of the behavioral side of performances measures. I’m talking about the good to great zone. You don’t get there because you’ve done it through the text books. And making business simple. You need clarity. Make the direction in which employees should travel clear to the staff.
TARGIT: What about TARGIT inspired you to commit to be the key note speaker at Decision Day?
Parmenter: After I was approached to be the keynote speaker, I took a good look at the company. TARGIT is helping organizations work with data, make prompt decisions, and align standards. That’s a vital part of performance monitoring. I’m delighted to address both audiences at Copenhagen and in Tampa. I’m looking forward to sharing my newest research.
For more on David Parmenter, take a look at some of his recent guest blog posts on the TARGIT blog part 1, part 2, part 3, and part 4 as he examines the myths of performance monitoring.
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