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The Stupidity of KPIs in Business Analytics
August 23, 2012 in Business Analytics, Business Collaboration, Business Intelligence, Business Performance, Cloud Computing, Customer & Contact Center, Financial Performance, Governance, Risk & Compliance (GRC), Information Applications, Information Management, IT Performance, Location Intelligence, Operational Intelligence, Operational Performance, Sales Performance, Social Media, Supply Chain Performance, Sustainability, Workforce Performance | Tags: Business Analytics, Business Intelligence, Key Performance Indicators, KPI | by Mark Smith | Leave a comment
In my last rant, on business analytics and the pathetic state of dashboards, I pointed out significant flaws in business intelligence software created by technology providers and in how it is being deployed by business and IT. Now I want to follow up with some insight on disconnects to a critical asset that is essential to the success of business analytics. I mean key performance indicators (KPIs), a term used in inaccurate ways that have diminished the value of the concept for business.
Let’s start with the definition; for practicality I will use Wikipedia, which says that a KPI is used “by an organization to evaluate its success or the success of a particular activity in which it is engaged.” The success being evaluated could be a goal, a target or something else that is important. To set a baseline, you calculate two measures and compare them to create a performance metric. For example, units sold and unit price are two separate measures that can be calculated to produce a metric called sales. Then through iterations of more precise calculations, this measure can be refined to compare against the sales quota or goal for a specific time period; this creates a key performance indicator on the outcomes of sales and even marketing efforts.
In actual use, however, the KPI, its use and its value have been dumbed down in ways that diminish the quality of intelligence we gain from using business analytics. First is the vague and contradictory ways in which the term is applied by technology providers and practitioners. Over the last decade I have seen “KPI” used to describe what are actually metrics – the building blocks of KPIs – and only sometimes performance-related. A metric like revenue or sales is not a KPI; neither are cost-specific, throughput-related metrics based on quantity or processing, nor customer-related metrics like first-call resolution. Such metrics are commonly presented in dashboards through visualization and called KPIs. Today we seldom see scorecards that use business analytics, which once were common for presenting KPIs properly to business users. Maybe it is time to start using scorecards for managing performance and not just measuring it.
The second issue has to do with the performance part of KPI, which should show how an organization or any of its business processes measure up to expected outcomes. Ideally, upon viewing performance-related metrics or indicators, within seconds an individual should be able to determine what, if any, action should be taken to improve performance, such as discovering what is contributing to the subpar performance or identifying opportunities for improvement. This root-cause level of actions requires examination of different classes of metrics related to performance and can range from people and processes to customers or risk. Understanding the cause and effect of metrics requires knowing and presenting the process and interconnects of how a business operates. Unfortunately most business analytics software just will provide you a table of data with no insight on what metric is contributing to the issue. By creating the right types of metrics underlying a KPI, we can reduce the time and resources required to support the communications (email, phone calls and meetings) that people normally use to investigate performance shortfalls. To get to this point requires creating a library of measures, metrics and indicators that can cross a variety of situations and help inform action-taking and decision-making. Let’s drop the P and just say key indicators (KIs) to set a new context that focuses on the indicators and the types of metrics that support them. This could lead organizations to make substantive improvements.
The third step is to make KPIs or KIs relevant to the particular roles and responsibilities of individuals. Company or divisional KPIs are interesting but only provide a general view of how an organization is performing. Where the rubber hits the road is the context of the indicators and metrics at the department, team and individual levels. We need to provide the ability for individuals to select their own focus within the scope of these facts and figures to determine how well their activities are contributing to the execution of business processes and outcomes. Here the role of business analytics is critical. To make the analyst buzzwords self-service BI and agile BI being pushed by IT analyst firms a reality, tools have to make analytics more intuitive to users. More tools for data discovery are not the answer, and making users select their scope every time they get an updated report or dashboard is a waste of time that decreases productivity and increases costs in running an organization. Instead let’s design a new generation of business analytics based on roles and individuals developed through a profile; this could go a long way toward streamlining the focus of analysis and preparing individuals to quickly determine what action to take.
To erase the stupidity in how KPIs are spoken about, demonstrated and actually deployed, we need to advance our dialogue and educational discussion of what key indicators and range of metrics are required to support particular deployments. I have already said that just placing more charts in a dashboard, no matter how pretty and interactive they might be, will not help support the actions and decisions that business analytics should enable. The effort to make KPIs more valuable begins with ensuring they are properly developed and represent performance in terms of the state of success toward achieving the goal or target. Showing past performance is insufficient without knowing how well it met expectations. Presenting a KPI does not necessarily require a chart; it can be done equally well by text presenting it within the context of how the people or process is performing over time and where it is in progress toward the expected target. These indications can be linked to additional facts with a directional arrow or other simple representations that make it easy to determine whether to take action. If your business intelligence software does not support a simpler way to communicate key indicators and metrics, maybe you have the wrong tool.
If we admit the flaws within our deployments and technologies and force ourselves to have more realistic conversations, we could advance the science of business analytics. Over the years we have made strides forward and then taken steps backward in trying to meet the needs of the lowest competency denominator. We need to aim higher and take steps to find out what should be done to produce full value from business analytics. Increasing the value of these investments can help an organization increase its efficiency and effectiveness. If you are not sure if you are heading in wrong direction with your metrics and indicators, just let me know, that is what myself and others at our firm do for a living.
Regards,
Mark Smith – CEO & Chief Research Officer
37.769127
-121.960068
WorkForce Software Focuses on Effective and Efficient Workforces
July 27, 2012 in Business Analytics, Business Collaboration, Business Intelligence, Business Mobility, Business Performance, Business Technology Innovation, Cloud Computing, Customer & Contact Center, Financial Performance, Governance, Risk & Compliance (GRC), Information Applications, Information Management, IT Performance, IT Research, Location Intelligence, Operational Intelligence, Operational Performance, Sales Performance, Social Media, Supply Chain Performance, Sustainability, Workforce Performance | Tags: HTML5, mobile workforce, SAP, SuccessFactors, Time & Attendance, Workforce Management, workforce software | by Mark Smith | Leave a comment
Our research agenda for 2012 in human capital management outlined the importance of workforce management for all organizations. One provider, WorkForce Software, provides systems that support scheduling, time and attendance, leave and absence and fatigue management. As I noted in my last analysis on WorkForce Software, the company’s focus on the fatigue aspect of workforce management, especially in white-collar environments such as transportation, utilities and healthcare, has provided them both recognition and growth. I attended the company’s first technology analyst summit this week to get a deeper view into the company and its products and see how it is shaping up in light of our research on the key applications providers in this market.
WorkForce Software continues to grow its customer and employee lists, with now hundreds of customers and rapidly growing cloud computing adoption through software as a service. The company continues to advance its core EmpCenter application, which provides a range of capabilities. Part of its unique approach is the configurability provided in its Advanced Scheduler, and its ability to monitor workers that might have multiple responsibilities that organizations need to account for cost or job tracking, which is critical for finance and activity-based costing where grants and budgets need to be closely tracked. This configurability is available without the need for custom programming; the policies and rules are defined by the business users who are held accountable for them. It’s easy to switch between activities and do costing for work at potentially different rates – a critical requirement for organizations such as universities and service businesses that use labor for a variety of needs. The application integrates pre-developed content from labor law and industry regulations to help ensure that scheduling complies with these policies. It’s predictive and policy software approach can assess any potential conflict that could happen with planned schedules is unique.
EmpCenter 9 was released this year with a major focus on supporting global and mobile deployments, and it provides a more open and integrated approach with other applications. On the global side of advancements, EmpCenter now supports 10 languages in addition to English. On the mobile technology side, the company has enhanced the mobile aspects of Workforce Management. It now uses HTML5 so that EmpCenter Mobile can operate across compliant browsers on Android and Apple devices. The company has indicated that HTML5 will replace native support of Android and Apple-based technologies. I am still a little skeptical on a complete move to HTML5, as it has not yet proven its stability across browsers, operating systems and Android devices. In addition, HTML5 cannot leverage local mobile hardware features for camera, video, field communication (NFC), gesturing and other technological advancements the way a native approach can.
The new release provides some critical productivity improvements. For instance, in what it calls one-touch callout, shifts can be announced to workers across multiple channels, such as email, text, phone and even social media, This helps address the preferences of workers; for instance, millennials often respond faster to texts than emails. Event-based scheduling can help plan one-time events or projects that need immediate attention for staffing, and can use one-touch callout to reduce the time it takes to get workers with specific skills. Across the board EmpCenter 9 has improved usability, from simplified steps in prompted wizards to more use of dragging and dropping in the application interface.
At the analyst summit, I got a deeper technology review of the software’s badge and biometric reader options. I got to see the new EmpCenter Engage Tablet, which uses an Android tablet for a range of time and attendance and other necessary worker interaction tasks, and which has a video camera that can be used for identification. This technology supports global deployments in regards to power and network connectivity, and supports attachments for other interaction needs. The Windows-based EmpCenter Touch Screen provides a simple kiosk-based approach that can be used in many environments. The company also can support time and attendance tasks at the desktop, allowing for easy checking in and out of projects. This variety of choices is part of the unique value in WorkForce’s approach compared to others, and it is an area that we focus on in our benchmark research on the needs of organizations in next-generation workforce management.
With regard to openness, WorkForce Software has expanded integration with ADP, IBM, Oracle, SAP and even Kronos to help make its software easier to integrate. I recently came across WorkForce Software at SAP Successfactors conference and saw how the two companies are working to integrate the talent management and new global payroll offerings. These technical partnerships help WordForce Software ensure the highest level of productivity and advancement for organizations who want to employ workforce management. As the company continues to advance its applications, it will need to address the concerns we have found in our data in the cloud benchmark and the broader needs we uncovered in our information management benchmark.
My review of version 9 provided some critical insight into its flexibility for meeting a range of needs across industries, especially those that need to track time and allocate costs. It has many nice capabilities for managers and employees for keeping track of information and alerting them to potential issues that could arise, such as when overtime could occur with a current schedule or when issues arise based on policies and compliance. It also can support a blended rate based on tasks and place of work. These are critical needs for varying industries, and point to the software’s flexibility for business users. Still, nothing is perfect – I believe EmpCenter could use technological advancements in its workforce analytics; specifically, usability and interactivity for a range of needs should have a higher priority than what I have seen. The company should also explore further ways in which it can help organizations engage employees, which will require some examination of social collaboration, and where it can integrate further with the onboarding of workers, to speed the process and find ways to limit the administration and paperwork required.
Workforce Software is doing a great job to advance the workforce management software market. Its challenges are less in its software and more in advancing the visibility of the breadth and depth of its offerings and gaining further adoption in white-collar industries, where businesses still manually handle many of their workforce’s scheduling, tracking and monitoring tasks. WorkForce’s fatigue management feature is a critical distinction for its software, and its approach can be used in many industries. Now, as it is fully engaged in the software-as-a-service approach, the company can gain new customers who don’t want to worry about technical implementation or resource issues at their sites.
If you are ready to reassess your current approach to workforce management and have not considered WorkForce Software, you should examine it more closely, as it has a good reputation and a solid offering in the market.
Regards,
Mark Smith – CEO & Chief Research Officer
37.769127
-121.960068
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