How do you choose the right KPIs, without losing sight of your strategic goals?

Prefer watching to reading? Check out the video at the top of this page to hear Bernie Smith explain it himself.

Bernie Smith, a recognized expert in KPI development, emphasizes this challenge through a compelling analogy: poorly coordinated decisions, much like a street renovation immediately followed by tree removal, lead to meaningless outcomes despite good intentions and substantial investments.

The Persistent Challenge: Aligning KPIs with Strategy

Smith notes a recurring issue in organizations, the disconnection between chosen KPIs and strategic objectives. Many KPIs, although individually logical, fail collectively because they are not aligned or prioritized correctly. This misalignment results in wasted effort, resources, and ultimately confusion rather than clarity.

To address this challenge, Smith developed the Results Orientated KPI System (ROKS), known informally as the ROKS method, a structured seven-step process focused on aligning KPIs directly with strategic outcomes.

Introducing the KPI Tree Concept

Central to the ROKS method is the idea of KPI Trees, an evolution of the traditional strategy mapping approach popularized by Kaplan. KPI Trees visually break down broad strategic objectives into specific, measurable elements, enabling better alignment and clarity.

Smith illustrates the KPI Tree method with a simple personal example: aiming for good health. The top-level strategic objective—being healthy—is broadly accepted but not directly measurable. Breaking it down, Smith identifies measurable components such as exercise frequency, sleep quality, and dietary habits. Each subsequent level adds specificity, eventually reaching clearly measurable KPIs, like daily calorie intake.

Benefits of KPI Trees:

• Clarity and Simplicity: Complex strategies become clear and actionable.
• Alignment and Engagement: Collaborative construction of KPI Trees fosters consensus and team buy-in.
• Visualizing Conflicts: Clearly illustrates potential conflicts between KPIs, ensuring balanced decision-making.

Dealing with KPI Overload: The Importance of Shortlisting

Despite their advantages, KPI Trees can lead to an overwhelming number of potential KPIs. Smith identifies two typical mindsets regarding KPIs:

• Dreamers: Those inclined to measure everything imaginable.
• Pragmatists: Those cautious about adding KPIs, mindful of measurement complexity and workload.

To manage this tension, the ROKS method employs a rigorous shortlisting process, prioritizing KPIs based on their strategic importance and ease of measurement. This critical step ensures that only relevant, manageable, and impactful KPIs remain.

Practical Scalability and Adaptability

A significant advantage of KPI Trees and the ROKS method is their scalability. They are designed for adaptability across different organizational contexts—from banks and universities to manufacturing firms. Smith highlights that, although KPI Trees can initially appear complex, they become practical and reusable tools, easily adjusted to fit unique organizational processes.

Strategic Alignment as the Ultimate Goal

Ultimately, effective KPI selection is less about having many KPIs and more about choosing the right ones. Smith’s ROKS method and KPI Trees help ensure every KPI directly supports strategic objectives, clearly linking performance measurement with organizational goals.

In conclusion, organizations need a systematic approach like the ROKS method to avoid common pitfalls in KPI selection. Aligning KPIs clearly with strategic objectives ensures clarity, relevance, and actionable insights; critical components for sustainable organizational success.