Key Performance Indicators (KPIs) are to organizations, what performance reviews are to employees: They acknowledge the status quo and help track progress. Important as indicators, KPIs provide insight into aspects of the company, like profit and loss or product development.
While they are a valuable tool to benchmark how the business is doing, they have moved far away from their original intent. In many organizations, KPIs have become a very long and complicated list, that gets shared via email to many different stakeholders, often with little context.
Visual Reports Say More
More often than not, these emails don’t really get read or given the attention they deserve. At best, people tend to store them away with plans to get back later- but, that “later” never comes. Studies show that people are usually unable to process such large volumes of data and even so, they are better at processing data that’s visual.
When an overdose of numbers gets sent their way, without the figures being tailored to each team’s context, it quickly becomes overwhelming for most people. Which is why the exercise of sharing data on the company’s KPIs devolves into futility.
Instead, by reducing all this data into short and visual reports, most information can be disseminated to the large majority of employees easily. By defining a few basic indicators, like profit and loss, employees can skim the headlines and obtain the relevant insights. For those who are interested in getting into the nitty-gritty details, further information can be made available.
Here are two case studies from Semco that reveal how the company got creative about its KPIs.
Motivation Via Television
At Semco, they decided to report to employees their most important KPIs in different formats – one of the popular formats was the TV screens that were put up all around the offices and the factories. These screens were linked to a central system that transmitted in real time three important KPIs: The sales results, production numbers, and technical assistance.
It was created because the management realized that there was an internal need for people to follow-up better on how production and delivery were doing. And, they wanted to follow-up on these numbers on a day-to-day or even real-time basis.
The goal was to optimize their production time to be faster from the time of production to delivery. Having the indicators clearly displayed on screen helped the teams get motivated and see if they were making progress or not. In that sense, they could easily identify what were their struggles were and if they were doing well, or if they were ahead/ behind the forecasts.
The Barometer Of Context
The Barometro Report, in Semco, was a document shared with the whole organization. It gave a sense of how the business was going and it focussed on the Profit & Loss (P&L) analysis. It was a summarized version of the P&L statement and indicated how the company was doing in the present moment – in comparison to the forecasts. Yearly forecasts and real-time performances were measured and compared every month.
The Barometro Report showed the gaps in performance- whether the company was exceeding or falling short of the predictions. The forecasts were continuously updated with new information from the sales department.
This report was shared via email to the whole organization every month. Financial numbers like the P&L statements were presented and explained in detail during the general and departmental meetings. It also contained some qualitative highlights apart from the numbers – for example, “We forecast that the next month will be higher than last year this time because there’s a new client joining the mix…” and so on.
So, there was always some highlights and some contextualization offered to help people read these simple, straightforward reports and to extract actionable insights/knowledge from the numbers.
Create Reports To Be Read
Every team needs to be aware of company performance, but they may not be able to zero-in on what’s relevant to their everyday work. The idea behind creating, simple and straightforward reports, that can be read and internalized in a flash, is to empower employees with the appropriate information. A simplified report, with a few KPIs, that outline how the company is faring, facilitates greater clarity and better decision making than a long-form report full of numbers and dry details.
Since such long reports usually tend to go unread or underutilized, they are also a huge drain on company resources involved in creating these reports. Switching to shorter, more precise reports is a better way to utilize the people behind these reports and it creates better clarity, organization-wide, on how the business is faring.