The importance of communicating Mission to KPIs
Most of us are probably aware that businesses put a lot of effort into developing a Mission statement, which ultimately flows down into objectives, targets, goals and Key Performance Indicators (KPIs) for staff. What seems to be less understood is that the communication of these is critical to their success.
We are going to start this article with an Example: Imagine you have the following Mission Statement flowing down to the following Key Performance Indicators:
|Mission||Objective||Target / Goal||KPIs|
|To be the World’s best Widget supplier, providing a product and service second to none||To provide prompt product delivery||Delivered within 2 days of order||Despatch: despatch within 2 hours of receipt|
|To provide high quality products||Less than 1% production rejects and less than 0.1% customer returns||Production: Less than 1% rejects|
|To be cost competitive in the market place||To be with 5% of the cheapest supplier of Widgets||Purchasing: Reduce material costs by 2%|
So the Company has its Mission which nicely flows into Objectives. These then have Targets associated with them from which individual Departmental Managers have their KPIs. This is all fine providing the whole chain is visible to everyone in the organisation, but what happens if not?
Analysis of Example
Despatch have been told that they need to send products within 2 hours of receiving. If they do this it may or may not meet the Target. If they are unaware of the target they may never suggest improvements to their processes. For instance, they won’t think to mention that if they altered their despatch lead-time to within three hours they can still meet the 2 day delivery target and reduce the number of shipments.
Production decide to implement a 100% inspection regime to ensure their rejects are below 1%. They are proud to find that their reject rate is currently running and 0.01%. They could relax their 100% inspection and continue to meet their KPIs, but why would they? They are aware of the Mission Statement, which says the product has to be second to none but they aren’t aware of the objective relating to being cost competitive.
Purchasing are aware of the Cost Competitive and the Providing High Quality Products objectives. However they aren’t aware of the other departments KPIs or their performance against them. They have been working hard to find an alternate, cheaper material supplier. However none of the new suppliers can provide material of the same consistent quality of the current supplier. If they were aware of Production’s KPI they would realise that the manufacturing process looks like it will handle a lower quality material and still maintain product quality.
From the analysis of this example you can see how important full visibility of the chain from Mission to KPIs is. Without it, you place unnecessary hurdles in the path of achieving your Mission. People tend to look after their own patch of the workplace, without considering its impact on others. As a leader, you need to promote that cross divisional collaboration. If you are only a small business with one person overseeing a couple of managers it is unlikely to be a big issue. But with several layers of management it becomes much more complicated. You need to encourage collaboration to achieve your Mission.
Contact us if you’d like some help setting objectives, targets and KPIs aligned with the Business Strategy.