Practical KPIs with Bernie Smith, Author, Consultant & Trainer

Jenn DeWall:

Hi, everyone. Thank you so much for tuning into this week’s episode of The Leadership Habit podcast. It’s Jenn DeWall here. And this week I sat down and connected with Bernie Smith. Bernie coaches businesses to develop meaningful key performance indicators or KPIs and present their management information in the clearest possible way to support good decision-making, which we know is essential right now. Frustrated by the random way, in which performance measures are often chosen and implemented Bernie setup made to measure KPIs. In 2007, the goal was to develop simple, structured and repeatable ways to create KPIs that humans could design and use to improve businesses. Using the experience and scars of working with a huge variety of organizations over his consulting career, Bernie has boiled that experience down into simple, sensible, and practical advice on performance measurement. His books aim to share that expertise in a down to earth and conversational style. Bernie lives in Sheffield, UK with his wife, two children, and some underused exercise equipment. Enjoy my conversation with Bernie as we talk about key performance indicators.

 Full Transcript Below

Jenn DeWall:

Hi everyone. Thank you so much for joining us on this week’s episode of The Leadership Habit. I am so excited to welcome the man, Bernie Smith! He’s joining us from across the pond. Bernie, go ahead and introduce yourself. And also you might as well fill our audience in where are you joining us from right now?

Bernie Smith:

Hi, Jenn. I’m in what was described as the barren wastelands of the North. I mean, Sheffield in the UK, a place which has got a terrible reputation from The Full Monty, but is on the edge of a national park. So it is beautiful. rolling moorland than about a mile away from my window. So if you don’t know where Sheffield is, we’re about 40 miles away from Manchester. Everyone seems to know what Manchester is.

Jenn DeWall:

Or they follow the soccer teams or they’re like Manchester United. I got that. Bernie, you spend a lot of your work around helping businesses essentially, or I shouldn’t just say businesses. I know it’s not limited, but helping individuals, helping leaders really improve their performance. And a lot of your background comes within agile or even just really talking about, you wrote a book on key performance indicators or KPIs. Could you just go in and talk about your inspiration for the book? Why did you decide to pursue maybe this as, Oh, I’m going to write a book on KPIs? Cause that’s something that’s still some people I think don’t really know a lot about, but tell us a little bit about what you do. I want to hear about your book. And so does our audience too, because I’m just learning I’m along for the ride.

Meet Bernie Smith, Author of KPI Checklists

Bernie Smith:

Well, absolutely. So first of all, thanks, thanks for having me along. So the reason I wrote the book on KPIs it’s because people don’t like them and find them difficult. That’s the short story? So my background is I started helping organizations improve their operations about 25 years ago. I worked all over the world, so I worked with big manufacturing firms, particularly paper-making firms like Kimberly-Clark, Smurfit Stone, traveled the world and deliver what’s now called Lean Six Sigma, but before it was called Lean Six Sigma. So a lot of problem-solving a lot of measurement, a lot of improving businesses. You know, we turned businesses around in some situations. You know, several million dollars a year per site, extra profit through good problem-solving, good improvement techniques. I then moved industries because I like spending time with my family rather than traveling the world and staying near paper mills.

I did the same thing with retail banks. I’ve worked with every UK retail bank, quite a few of the investment global investment banks as well. Doing a similar kind of thing, improving processes, but I noticed a common theme KPIs. So key performance indicators, the things that tell us how well we’re doing or how badly we’re doing or which bits need improving. They were sort of unloved stepchild of the business. Everyone had a go at doing their best, and they were all doing their own thing to the best of their abilities, but the end result just didn’t make any sense. It was a really confusing mass. And one of the first things we’d start doing on a consulting project would be to try and actually figure out what’s going on by sorting the measures out, the KPIs. So after doing this a few times, I realized that most organizations and, and an awful lot of managers have problems figuring out what’s going on and would love to be able to measure things.

Now there’s a few ways you can approach that she couldn’t wait for an expert, someone who just comes in and tells you what to measure, but that doesn’t really work whose every business is different and every business situation’s a bit different. So I just wanted you to come up with an approach that was universal. And in fact, the method that I developed has only one requirement and that is to know what you want to achieve. So it’s being clear on what strategic outcomes you want. Now, strategic quite big way of putting it, but it’s simply knowing what we’re there to do. So-

Why are KPIs Important?

Jenn DeWall:

I love that. Wait, I want to break that down because that is in its simplest form. I think you touched on a few things. There’s I think initially our tendency that we just start kind of all showing up and doing our job, but we’re not necessarily sure of what we’re driving towards or what impact that we’re having. And why do you think that is? Like, why do you think that maybe companies or organizations don’t necessarily have, like, when you think like I’m getting paid by a company, I should know exactly how I’m contributing to their success, but why don’t we know that?

Bernie Smith:

Well, yeah, that’s a really interesting question. I mean, I think there’s a, there’s a couple of things going on here. Firstly, I think there’s, there’s a tendency in human nature to assume, you know, what people want and to see, you know what they’re saying. And there’s lots of examples. I mean, Daniel Kahneman might got a Nobel prize for, for explaining this whole thing is called cognitive bias. So first of all, people tend to make assumptions about what’s expected and what’s good for the business. And the other thing is it can be quite difficult. How do you take something, which on a really high level, you know, if you know, if you’re running a global business, how do you take the strategic objective of that business and turn it into something that’s relevant to someone working on the process or facing a customer, how do you break that down? And that was the thing that I noticed that people were finding difficult. And that’s what I tried to tackle in KPI Checklist. So I developed a methodology for visually breaking things down. So taking these massive overarching goals, breaking down layer by layer, and then getting to something where you say, this is the difference you can make. This is the thing that we can measure to show whether we’re on track and this is how it links all the way up to the top. And to do it in a logical way.

Jenn DeWall:

Yeah. That’s, I think that’s so important because again, like I can tell you that depending on my role, depending on I guess, whether or not I had an opportunity or even insight into strategy, I may or may not understand what’s going on. And I think that that can create just more barriers for the people that are actually in the strategy room, creating that no one knows what they’re working towards, so they’re not helping you with your KPIs. But you wrote the book, the KPI checklist, and again, KPIs in the simplest word. Like how would you simply define what a KPI is for those that are key performance indicators, for those that are maybe new to that term, how would you define that?

Measuring Your Key Performance Indicators

Bernie Smith:

In really simple terms? A KPI is simply the measure of something you care about. So whatever’s important to you or to your business. That’s key- and performance indicator just tells you how you’re doing it. So we’ve all got KPIs. I mean, you know, my KPIs is how much I weigh and how much I’ve got in my bank. Things like that. How much I earned.

Jenn DeWall:

Yes! Those are your KPI’s. I don’t always measure those either.

Bernie Smith:

Oh yeah. I mean, it’s embarrassing to admit, but for many years I didn’t do what I was preaching and I kind of had a long, long dark day of the soul a few years ago and thought Smith, you need to sort this out. So I’ve got my dashboard. In fact, it’s what the second of the month. So I’ll be doing my dashboard after this call. I’ve got the bar charts showing how the business is being broken down. So I know it’s not easy. I know there’s always a million other things going on, you know, I’m a small business, so I completely understand the pressures. But I genuinely believe that you take that time. If you invest that time, looking at the handful of things that are really important to your business, then that’s the way you might long-term progress. Because we’re all really locked into short-term stuff, you know, responding to customers, keeping the wheels, turning, you know, maybe developing new products, it’s all really time-consuming.

And then sometimes you need to take a step back and just say, Hmm, okay, what’s the long game here. So I’ll give away one of my, one of my sort of trade secret KPIs, my business, I’ve got all the usual stuff around turnover and sales and whatever. But one of my key KPIs is of value of time spent. So I’ve got an interesting dilemma between spending time working with clients, you know, which is well paid. But only for the time that you work with them or creating books and materials, which might take 10 years to actually come through and justify their worth. And then long-term is a fantastic way of helping more people and also creating passive income as well. So I, I have, I have a measure where I look at the lifetime value of the time that I spend, not just the short term revenue. So just thinking about a little bit differently, there’s a bit more sort of maths involved, sorry, math. And you know, it’s just a slightly different way of looking at things and that’s, that’s how I make my decisions now within my business, how I spend my time. So it’s driven me to write a lot more books. This is actually book 1 of 19.

KPI Checklists

Jenn DeWall:

Hey, I want to talk about KPI Checklists but think about it. I mean the exciting thing about KPI’s and even as you’re talking, I, the wheel, the wheels are turning for me. Like, what else could I be doing if I truly did measure my time, would I be spending less time on unproductive emails? Would I be spending less time picking up my phone and messing around on social media or a game? You know, I think that I could really benefit from starting to measure the things and I don’t do it right. I’m a business owner, but I also support a business and I feel like I don’t do it so I can understand why maybe some people are living in that more reactive place. But when you wrote KPI, checklists, what were you hoping to help people be able to do or help organizations be able to do?

Bernie Smith:

So it actually started as just a big sheet of paper. So I found myself with a client in Manchester, in fact walking them through the steps that we needed to go through to build or identify the most important performance measure, square business, the KPIs. It was a medium-sized bank. And I realized I’ve done this a few times before. And I thought, well, rather than drawing it out on a sheet of paper every time, maybe I need to do a better job at this. So I started to document the method. So it’s seven steps and the idea is it takes you from strategy through to implementation and it covers each of those steps along the way. So I started formalizing the process, just testing it, checking that it worked you know, exactly as intended. And, you know, there was a bit of, bit of learning bit of sort of adjustment required there. Got it into good shape and then realized that alot of books, a lot of management theory books, are very high-level. They’re very general. They talk in terms of theories and case studies, but they don’t really tell you what you need to do. So my, my background is, you know, I’m a practical guy, I’m an engineer by training and I like to know what to do. You know, I, I want someone to tell me this is how you do it.

Jenn DeWall:

Yeah, you want the process piece of it!

Bernie Smith:

Exactly. So the idea of the book is, is how-to guide. It’s not theoretical it’s based on what works. So I thought, right, okay. The book I would want would explain why we do each step. So there’s a few pages talking about that and there’s actually a story about why it’s in checklist format as well. So I read a fantastic book called the checklist manifesto by a guy called Atul Gawande. He’s a doctor and he implemented checklists in the Great Lakes Area, I think. He saved 1300 lives across five hospitals when he first implemented a checklist. And there’s a fantastic story about how the U.S. Air Force actually implemented them. So they had a fatal crash when they were looking for the next-generation bomber. The Air Force concluded, the bomber was too complex to fly. A couple of innovative test pilots decided to implement checklists, flew several million miles with no problems at all. And that’s how checklists were born.

So I talk about that story in the book and then on each of the steps, I talk about what steps important. And then here’s what you need to do. So we talk about the workshop you need to do there’s tools and templates. There’s certain steps you have to go through. I also talk about pitfalls. So really I wrote the guide that I would want, and I wrote a guide that was intended to not be a long read because we’ve, if you’re anything like me, you’ve got a bookshelf full of worthy books, but you haven’t quite got to the end of. I mean, I talk about Daniel Kahneman, fantastic book. I’m only two thirds of the way through it. So this is a three, three and a half hour read. I know that because I I’m the reader of the audio book. So it’s just designed to be what you need to know to get going with this. Because if I’m honest, no one does this stuff for fun. Yeah.

Jenn DeWall:

Yeah, the perception is hard. It’s just how maybe people are looking at the problem or what they’re doing. And it does. It’s what you alluded to in the beginning. People think that it maybe is so daunting or just too challenging that initially the response is, I don’t know, I just have to like wave the white flag and I’m going to send it over to a consultant. But your book is for even the people, if you don’t have the resources necessarily to go in. And if you just, and actually, if you, even, if you do have the resources, you should still understand this at a simple level. So then you can make sure you’re guiding anyone that’s going to come in and work. What would be one of the first steps that you think someone should take? If they’re starting to look at this and they’re getting, they’re cringing a little bit of wanting to approach it, what would be one of the first things that you would say for them to do? If they’re looking at maybe a business challenge or how to improve a procedure or process, what would, what would you say, where do you see?

The Cobra Effect

Bernie Smith:

Okay, so these, these two important things here. The first thing is to think carefully about what you want your business to achieve. This tends to be the thing that people rush through and often tell till we the Cobra effect story to sort of illustrate the, the pitfalls of, of getting a strategy wrong. Have you heard the cobra effect?

Jenn DeWall:

No, what is the Cobra effect?

Bernie Smith:

This is the kind of apocryphal tale. But it illustrates things quite nicely. You know, the, the small, the small difference between success and total disaster. So legend has it 150-200 years ago, when the British ruled India, that one of the governors in a large city in India they had a cobra problem. So he decided to offer a reward for dead cobras. So his implicit strategy was we’re going to offer a reward for dead cobras. Okay. So he implements this and the local start hunting for cobras and they get pretty good at it. They bring the dead cobras to the town hall and they get a bounty. So this goes on for a while and then the wild cobra population starts to dwindle. So if you’re an enterprising, local who had a good income stream from hunting copers what do you do? Well, you start to farm cobras. So the local started to form cobras. The supply was resumed. They carried on claiming reward money from the.

Jenn DeWall:

So there was a new revenue stream from this!

Bernie Smith:

Indeed there was! So, governor got wind of this. So he stops the reward for cobras. And if you’re a Cobra farmer with a stock of venomous snakes that are now worthless, and need looking after, what are you to do? You release them into the wild?

Jenn DeWall:

Yeah. Yes. That’s. You’re like, I don’t need to take care of that. Oh my gosh. Okay. So what happened? They released a bunch of venomous snakes!

Bernie Smith:

So they released the cobras At the end of it, the town hall and the government had paid out fortune to kill a load of captively bred snakes. And the wild cobra population had actually increased. And arguably there was a sort of failure in the strategic wording of what he set out to do. He should have really focused in on the fact that it was wild cobras, not just cobras. And he obviously thought that was implied when, when he started offering the reward. But a small error in intent and a small error in implementation had a completely counterproductive effect. Now I’ve got a lot of fairly gruesome tales from clients, which I can’t share. But the reason it’s number one on, on the process or in the Rocks method, is if you get that step wrong, everything else is propelling you in the wrong direction, faster and with more enthusiasm. So you need to be really, really clear on what outcome you actually want. Think quite carefully about exactly what you want because small differences can make a massive impact on the reality. And then the other thing is to think about where your pain is. Now, one of the problems that people have with KPIs is there is almost overwhelming choice of what, what you could measure.

What do you Need to Measure?

Jenn DeWall:

You could measure anything like, Hey, how many, how many days does someone come into work? How many emails did they send? I mean, anything.

Bernie Smith:

Yeah. And that’s the heart of the process. So steps three and four. They’re actually, there’s two steps when it comes to selecting KPIs, because I discovered the hard way that these two types of people. There’s people who dream, and they just want to measure everything. I make tend to be the senior people in the business because they don’t have the pain of actually going and implementing these measures.

Jenn DeWall:

Can we talk about that? Because I do think that is such a big challenge. You have people that I think it’s, you know, whether you want to call it the low-hanging fruit or look at all this possibility that’s there and then they want it all. And I think everyone else that maybe, you know, without the power, that’s just maybe more like they’re having to try and implement. It’s just like, what, why are we even doing this? And it feels like it can feel grossly like overwhelming and just frustrating as an employee to be like, why are we trying to do so much? And then to be also met with, we’re not even measuring what we’re doing, we’re just doing it because everyone else is doing it. And it’s what we think we should do, but we don’t necessarily going back to your first, like, we don’t necessarily know what we want. It might be just, we want more sales or want to sell more units. So we’ll just throw paint on a wall. And, Oh my gosh, it is the most infuriating thing. Like, and we know that it creates initiative fatigue where people become less, I guess, responsive to your tasks, to your strategies. They’re not as enthusiastic. And then they can just kill the ones that probably are your good ideas.

Bernie Smith:

Absolutely. And you know, that’s a completely universal problem. So what we do in the method is we have two steps. Step three is for the dreamers. And that’s where we think about all the possible measures. And we do that with a visual method. And then step four is for the pragmatists, the practical people. And what, what, what I do is I explain this as we go through so that the pragmatists sit on their hands in step three and put up with it. And then when we get to step four and the dreamers have to go, all right, okay. Over to you. And it’s actually quite a, quite a simple division. So step three, we build this thing called a KPI tree where we break down the top level strategic objectives. We go through a couple of layers and I can give you an example.

So the example I use when I’m doing training is my top level objective as a middle-aged guy who spends too much time on Zoom, is to be healthy. Okay. So be healthy. That’s great. That’s a fantastic objective, but how do I measure it? Well, I can’t measure it directly. What I can do is I can break it down into its constituent parts, so, you know, okay. It means I eat well. I sleep well. I sleep well and I sleep long enough. I’m in a relaxed state on regular basis. I’m aerobically fit. I manage any bad habits. I’ve quit smoking and drinking, so good. You know, we’re getting a bit more detailed, but we need to break it down a bit more.

So if you take the, the, the eating, well, we can talk about calorie intake. We can talk about balance and nutrients. We can talk about whether I’ve got the right balance of carbs, protein, fiber, and so on. Then you’re getting down to a stage where you’re able to break things down into KPIs. So we’re getting to the stage where we can actually measure things. So we’ve built this tree diagram, we take the high level objectives, and we break them down into logical chunks, and we do that twice. And then when you do that, you get to a point where it’s pretty obvious what you want to measure. So if you talk about, you know managing calorie intake, correct, we just can’t counter it. You know, we’ll read the packet, write it down.

Breaking Down Your KPIs

Bernie Smith:

Of course, it’s a bit more complicated than that, but the idea is that we create this visual representation, very easy to read. They’re a bit tricky to build, but they’re very easy to read and share and discuss. You can put stickies on them and write on them, and that’s great, but it produces too, too many KPIs. So then we go into the step four. The one for the pragmatists, for the IT department, the BI team and whatever. And the good news is we’ll, choose not to measure about 90% of the KPIs from the tree, but the tree gives us the universe. And then we can have a discussion to shrink it down. And the way we do that is we just ask two really simple questions. We say, how important is this KPI? And how easy is it to measure? And we give each KPI a score of zero to ten on those two. And the sort of reference point I use is cash in bank, because for almost every organization, it’s a 10 for importance and an eight, nine or ten for ease of measurement.

So that, that goes in that top right-hand corner. And if you multiply those two scores together, it gives it a ranking number between zero and a hundred. So we can, we can sort our KPIs by the score. If it’s a hundred, you know, if it’s a nice high score, great, we’ll, we’re going to measure it. As we work down the list, we get closer and closer to borderline cases. And we have a discussion and we record the reason and you end up with a carefully reviewed list of KPIs we choose to measure. And some that we choose not to measure, and really importantly, some which are important, but not necessarily that easy to measure. Now, these are the gold bars. These are the things that if your competitors find them difficult to measure as well if you can figure out a way to measure them, you’ve got a unique, competitive advantage.

So if you take two questions, how credit worthy is Bernie, or how relevant is this webpage to the query I’ve just typed into my browser. Those are both questions that are really important, but hard to answer. And Experian and Equifax have done an amazing job of taking terabytes and petabytes of data and turning it into a simple answer on the credit question. And Google did a fantastic job of taking that query question and coming up with a good answer. So there are in any industry, there are questions that are very difficult to answer, but if you find a way of answering them, they can be game-changing and they tend to get thrown out with the bathwater, as we say. They tend to get discarded because they are hard. So this process does two things. Firstly, it narrows down the selection of things that you choose to measure really dramatically.

So it might be five or six KPIs that you start with not completely fine, but what it also does is it helps us keep an eye on the long game. It helps us keep an eye on the things that we would like to measure, but we can’t at the moment. And I can give you an example. So I was working with a pension firm and they were losing customers. They were transferring their pensions elsewhere and we have a meeting. And in that meeting, one of the managers said, well, to stop this, we’d be able to, we’d need to be able to read the minds of our customers. He just dismissed it. He said, there’s no way we could do this. But what we found was when you look closely at the process, because they were losing millions of pounds worth of pension this way.

When you look closely at the process, there was actually a way that you can anticipate if customers were going to leave. And the way you do it is there’s one thing that someone does just before they transfer their pension, they ring up for evaluation and we found those people are about to leave. And we also found that they had just automated that process, which is why lots more people were leaving. So all I would say is, you know, sometimes you will find things in your business that are really important and looking possible. Don’t give up on them, keep them on your radar, because if you can figure out why I’m doing it and you know, you can, can transform your business.

What if We Can’t Agree on What to Measure?

Jenn DeWall:

You know, there’s, there’s kind of two things that came after that explanation that came to mind for me, it’s one, you know, you gave a really great framework to be able to then rank and say, what’s the importance, what’s the impact. This is the criteria that we’ll use to be able to throw something out. But then you have to add in the human element, right? How do you overcome the human element of, but I still think that one’s really important? And so we should still really do that because I saw something or I read something or they’re doing it. You know, what’s your advice for that for, to be able to manage maybe those personalities that don’t want to see the data or still are really, there might be a lot more ego involved. What would be your advice?

Bernie Smith:

I mean, that’s a really common problem. The approach does diffuse that to some extent, because when you’ve got things written on the list, it becomes a discussion about the score on the list, rather than a discussion of someone else’s opinion. I was quite surprised to find this, but as soon as you have a system involved, and a process, it becomes a lot calmer discussion. When someone just speaks out and says, I think we should measure this. That’s when it gets quite heated. So using the method does generally avoid any kind of heated debate, but the way to deal with those kinds of discussions is to look at the neighbors. So look at KPIs that are above or below that KPI, and have a discussion. Do we think this is more important than X? Do we think it’s less important than Y?

And there is some element of negotiation, you know, if, if, if it’s going to cause a major stakeholder to fall off the project, then you know, we may compromise. We may flex. None of this is absolute, but the idea is to provide a structured framework and a structured approach that enables the discussion. You know, it’s not a magic wand. It is just, just a structured way of doing it. But I found that it, it works well and we don’t have sort of classic arguments of opinion, but seem to characterize this. I mean, it was those kinds of arguments that really helped motivate me to come up with a method, because I know I like to have something that is based on reason and based on structure rather than simply opinion and shouting matches. Generally those are won by senior people. That’s not always where you want to be.

Jenn DeWall:

No, and I want that as an employee, as a business owner, as all of those things, I want to make sure that data is there. You know, I would be someone that I wouldn’t identify as a data person. I wouldn’t identify as you know, I’ve had analyst in my title. I wouldn’t say that was my strongest suit. Yeah. I could analyze the data, but I wouldn’t call myself maybe what some people might label a math person. Right. But the benefit of data, you know, I think in terms of even how you’re saying that if we think about workplace conflict or some of these challenges in determining, what way do we go, where do we go on a team? Right. We can all understand that. Data is the one piece that helps to depersonalize it. It’s not about being the best in the room or having the greatest idea.

It’s about making decisions that are informed. And it, you know, it’s not the loudest voice. That’s going to be able to persuade that. And I like that because I think if you go at it and say, we’re looking and starting with data. We, might’ve made a lot of impulsive decisions based on emotion, but we’re going to look at it from data and you might have some really great ideas, but this is what the data is telling us. And so now how do we want to respond? So that’s, I don’t know if you have anything to add. Because the other piece I want to touch on is maintenance. So you have the people component, but like, I don’t know if you have anything you want to add on that at all.

When you Measure KPIs, Don’t Be Afraid of the Math

Bernie Smith:

Just by one small point. You were talking about maybe not, not, not being the sort of most enthusiastic about sort of the mathematics side of it. This is one of the myths about KPIs. Almost all the KPIs I deal with are really quite straightforward to calculate. There’s nothing particularly clever, you know, they’re percentages, they’re adding, subtracting my own KPIs, my own business KPIs. It’s just basic arithmetic. So they don’t have to be super fancy to be useful. You know, really basic things like how much did we make? How long did it take, these are the things that will transform a business. You know, how many of our customers are happy? How many of our, you know, how many of our products got sent back? How many warranty claims do we have just counting, but doing it in a logical consistent way that’s repeatable. And you start to get trends and stories coming through that you wouldn’t pick up through anecdotes.

Jenn DeWall:

Oh, I appreciate that because I think that’s one of the things that we do need to recognize is it doesn’t need to be this, Oh my gosh, I have to put my head down and try and figure out new ways to assess this. And so I think we do complicate it when we’re starting to do it. But what you’re saying is it’s little things like looking at how much revenue are you bringing in, or how much time are you investing in a product? That’s I thank you for breaking that down because I know that I actually just perpetuated that myth on the podcast.

How do You Maintain KPIs?

Jenn DeWall:

So let’s talk about maintenance, right? So they do all of this heavy lifting in the beginning. We are sitting in that room, maybe with our team and we’re determining what direction do we want to go? And I think that the piece in my experience that does fall off is even if we do the data, we still somehow lose sight of it. Once we go into implementation, we, we forget to come back to it or we want we’re onto the next bright, shiny object. So what does maintenance look like if you were actually going to be great at measuring these KPIs or the KP forum, key performance indicators, what does measurement or maintenance need to look like?

Bernie Smith:

Okay. so first thing is to make sure you don’t overstretch yourself because maintenance gets harder. The more KPIs you’ve got to maintain. So I see a lot of organizations just biting off more than they can share, as we say. So keep it small to start with focusing just on the handful of measures that are really important. The other thing you talk about people forgetting to look at them, forgetting to maintain them. You need to check in at the right frequency. So a common mistake that people make easily, they will fit KPI reviews in with their existing meeting schedule. So it’s typically once a week, once a month, that’s a big mistake because for KPIs to be useful, you need to understand three things.

You need to understand how important the thing that you’re looking at is how fast it can go wrong and how much notice you need to fix it. So to give you an example, if you’re a surgeon in the operating theater, you’re not going to check the patient’s heart rate once an hour are you? Because you’ve got no more than four minutes to fix any plumbing problems if that heart stops. So you want that real-time and you’ve only got three and a half minutes at best to fix any problems. So very often the reason that KPIs fall into disuse is because they’re not that useful because they’re not being checked at the right point or the right frequency. So for me, you know, that things are working right when the first thing people do is they come in and they check the board, or they check the display. And they’re not happy and they’re not comfortable when they can’t see it. So hopefully you’ve worked in organizations where you’ve seen that you know, very often production organizations is intense, personal pride.

People come in, they want to see how the shift’s done. They want to know how the other shift has done because they’re competitive. And then they want to know what’s between them and a good shift sort of either the next eight hours or whatever. So the primary thing with maintenance is to make them an indispensable part of your everyday business. Once you’ve got that, then the maintenance part gets a lot easier because people care and they see them as an asset. If they’re seen as a chore, and if they’re seen as not relevant, people will not put the time, effort and love required to keep them going. So they need to be things that people care about deeply. So that’s why it’s good to start with some pain points. So when you’re picking your KPIs, if you decide to start with a small handful, pick some things that really help with making the business better. I mean, that’s the right thing to do anyway, but go for ones that are visible and ones that cause people a lot of personal pain and make that your start point. Because as soon as you start seeing improvements, being driven by those KPIs and people’s lives start to get better, then the KPIs become their friends. And that’s the important thing. They’re just tools to help you do what needs to be done

Jenn DeWall:

Well. And I think that one’s so important to making it relevant, showing people that what you’re working towards is solving maybe this frustrating email exchange you have to have with the customer, or, you know, it’s causing a breakdown in communication with the coworker. But solving something that’s going to mean something to them. I love just really thinking about that. It doesn’t have to be something that’s so like out there, that’s going to support the business. It’s just little wins, but you know, you’re talking about even the basics of change management that if you’re going to then take and put it into a strategy, you’ve got to talk about it. It has to be in your communication. You need to have a separate meeting where you’re assessing that and even making visual, like there are so many online resources right now, but even if you’re remote, you could make some type of digital tracking tool. What were you going to say?

The Simple Magic of a Whiteboard

Bernie Smith:

I was going to say, this is one secret tip that probably isn’t very COVID friendly. So yeah, when, when we come through all of this, this is a golden tip. There’s something magical about whiteboards, I don’t know what it is, but I found that if you get people to write the result on a whiteboard, it has much, much more impact than if it’s just appearing on a screen or on a printout. And I don’t know why it is, but it’s a fantastic way of getting people engaged. So I’m possibly 20 years behind the time here, but

Jenn DeWall:

Oh whiteboard on Zoom. Is that the feature you’re talking about? [laughing]

Bernie Smith:

Yeah, probably, but I mean, yeah, just physically getting people to write their own schools out and to keep score. I mean, I’ve, I’ve got a wrong machine in, in, in my shed and my kids use it as well. And I just brought my time’s up on whiteboard. So use it, let’s start writing their time’s up, putting a little star by their best score and whatever zero barrier to entry, highly visual, completely intuitive to use. But there’s a lot to be said for just taking a really simple approach. Just you might not stick with it forever, although they’re actually surprisingly useful, but it’s a great way to just gently introduce things with no technology with no complications, just get started. You can start now. All we need is a pen and a board and go for it. So I’d recommend keeping it simple.

Jenn DeWall:

I feel like I could even do that. I can just get a piece of paper and start writing instead of it, you know, and just tracking. Tracking and making sure that there’s consistent recordings in the journal and the diary and the whiteboard, whatever that may be. I know that we’re rounding out our time here, but I do just want to talk a little bit about the book that you are writing, because I know that we don’t have it, you know, it’s not there yet, but you are writing also a very important book. Do you want to just talk about that. They pair really well together? And I think it’s another consideration that, you know, we all need to take into account if we want to be successful. So what is the newest book that you’re writing?

Gaming the KPIs

Bernie Smith:

So it’s called Gamed- Why Performance Measures Break- and sorry, Why Performance Targets Break and How to Fix Them? So it’s all about performance targets, performance incentives, and the results that they drive. So if you look at the existing sort of management guidance out there, they talk about smart objectives, specific, measurable, achievable, realistic, and targeted. And that’s fine. You know, that, that covers quite a few of the key ingredients in setting targets and setting objectives. But when we look around, we see them going wrong everywhere. So I started looking at the Volkswagen Audi emission scandal and you’ve got one of the biggest firms in the world who cheated. They cheated their emissions targets. And I was really interested in understanding why that was some of their executives went to jail. One guy, Oliver Schmidt was arrested at Miami Airport seven years in jail. It cost them $33 billion in compensation.

Bernie Smith:

And that was really interested in understanding what was it about targets and target setting and incentives that drives that kind of behavior. And the more I started digging, the more I found. It was just really fascinating. And there are certain common mistakes that we make both in terms of setting targets and in terms of the incentives we applied to those targets. Also then the behaviors that they drive. And I’ve, I’ve written certain case studies cipher just going from bots, Audi and their emission scandal through to just some funny examples from motor-racing. And with them all, you can see common things starting to emerge. So if you can see common problems, then there may well be some lessons we can learn and some solutions we can apply. And that’s, that’s what the book’s about. And of course there’s a structured method in there as well for going from the outcome that you want through to meaningful targets that should drive the, the right behavior. But I was particularly interested in why things don’t work as they expected to and coming up with some solutions to that. So the plan is to have that out in January. So I’m writing it down at the moment, but all the pieces are there, it just needs sort of shaping into the finished product now.

Jenn DeWall:

Well, I think it’s, I love that your use of stories or case studies, because setting these peak performance indicators and these targets can bring about just as you shared in the Cobra story, an ethical conversation, what are people going to do? I mean, how are they, if you’re going to cheat your emissions in the case of Audi, what are people going to do based on the incentives that you set and how can you maybe get ahead of that? How can you at least try to be a little bit more, ok like what could happen? How could someone maybe bend this a little bit? And I think that’s a really important thing for us to keep in mind as we’re setting strategy, because just in the case of the Cobra, it seems so simplistic. He wanted to get rid of all the cobras in the city. Okay. Well, and there’s a ransom for it. So let’s go and do that. Well, eventually someone’s going to find some upside or it’s not even that they’re bad or malicious people. They’re just working within the rules that are there.

Bernie Smith:

People are amazing at finding loopholes. So one of, one of the stories I tell in the book is about a racing class called the GT production class. So the idea is really simple. That car manufacturers can produce sporty cars and you can watch them being raced on TV. So because of that and the there’s two rules in the class amongst athletes, firstly, you need to be able to buy that car as a member of the public. And secondly, that car needs to be able to hold a suitcase. So you think that’s pretty simple. You can see the intent, but because car racing is winner takes all. And this is one of the, one of the criteria is often identified as being really high risk because it’s winner takes all. Toyota, came out with a new car in the nineties and they argued that because the car was inspected with an empty fuel tank and the empty fuel tank was big enough to hold a suitcase, that met the suitcase criteria and it was approved and have the thing they identified was there was no lower limit on how many of these cars you could sell to the public. So they sold one.

So you have, you have some rules which were drafted with a clear intent. You cannot, you know, easy to understand why they’re there. But you’ve got what I call an accelerant winner takes all, but really puts the pressure on really, really encourages people to find loopholes. And they found the most absurd loopholes and these stories keep on coming up. So if you’re in a high stakes situation where it’s winner takes all very high reward or punishment, people text the rules to destruction, I’ve got lots more examples of that. But when you start looking around, you see it everywhere,

Jenn DeWall:

Right? And I want to have you back on after you write your book, just to talk about that, because that is such a problem within a lot of organizations. Just that winner takes all, whether that’s internally feeling like, you know, if you were going to cut through an organization and you want to get to the next level, it might have that winner takes all kind of mentality. And I’ve worked in structures like that, that it was just survival of the fittest climb that corporate ladder. It doesn’t matter how you get there, you got to do it. Or the bottom 10 get cut, you know, whatever that looks like. And just the adverse consequences that are sometimes unintentional. Sometimes it may not, they might kind of know they’re there, but they just ignore them. And knowing that like we have to do better, like, and also how are we framing things? Because if it’s a winner takes all, then someone bends your rules, then they cause some type of lawsuit. Well, then it would’ve made more sense to, you know, not promote that in any type of way.

What is Your Leadership Habit for Success?

Jenn DeWall:

So I need to have you back on the show, but I know that we’re coming time. So I’m going to, I’m going to wrap it up here, Bernie, this has just been a really great conversation, but I want to ask and close with our final question, which is what is your leadership habit for success?

Bernie Smith:

So the thing that has had the biggest impact on my life is using a really simple technique called the Pomodoro Technique. Pomodoro means tomato. I have no idea why it’s called that, but I use it when I have to grind my way through something I don’t want to do. And it’s substantial. So when I was writing this book, I have to write the definitions of 416 KPI’s with examples, not a fun task. And I did it with the Pomodoro method and it’s really simple. You set a timer and you do a work interval. So I do 20 minutes, but it could be 10, whatever you’re doing, when the alarm goes off, you stop for a short interval. I do five minutes. You do this three times. And then at the end of the third cycle, you have a longer break, 15 minutes.

And two things happen. Firstly, when you know that you’re time-limited, you work like you’re, you’ve got a deadline. And secondly, when you’re interrupted mid-task, you’re uncomfortable. So when you sit down five minutes later, it’s really easy to get back into it because you’ve stopped mid-flight. I find that that’s the technique that has helped me get through some really tough stuff where I’ve been procrastinating and putting it off and you can do it. I think Amazon, Alexa has an app for it. You can buy them for the Mac. You can do it with a stopwatch. It’s really easy.

Jenn DeWall:

So a half-hour, heads down working on the task

Bernie Smith:

Just 20 minutes. Yeah. Five-minute break, but he’s up to you half an hour’s quite a long time. So start short, build it up 20 minutes is about right for me, it’s 20 minutes, five-minute break, 20 minutes, five-minute break, 20 minutes, 15 minutes break. And you can get, for me, it doubles my productivity. So it’s quite intense. You can’t do, I can’t be more than about four or five hours like that. But you get much more done in the four hours than I would in a full day normally.

Jenn DeWall:

Oh my gosh, I’m doing that today. Bernie per your recommendation of doing that today, I want to see what I can do to be more productive. Because I absolutely have the tendency to procrastinate.

Bernie Smith:

We all get distracted by emails and messages and prompts, you know, and just having that deadline pressure, but repeatedly just, just keeps me moving and that’s the hard thing to do, isn’t it?

Jenn DeWall:

Yes, absolutely. But once you get started Bernie, thank you so much for your time and your stories and just sharing the insights from your book to help people you know, set better key performance indicators to separate our targets, to be more productive, to make sure that we’re getting that return on our time investment. I just really want to say thank you so much for joining us on the show. It’s been great to have you.

Bernie Smith:

It’s been an absolute pleasure. I’ve really enjoyed talking to you and I’d love to come back and talk about Gamed when it’s out. So thanks very much.

Jenn DeWall:

Thank you so much for tuning into The Leadership Habit podcast. I hope you enjoyed my conversation with Bernie today. If you want to connect with Bernie, you can find out more about KPIs at madetomeasurekpis.com or you can buy his book KPI Checklists on Amazon. Also, if you enjoyed this, don’t forget, share it with your friends, Share it with your followers, share it with your team. And of course, if you do like this content don’t ever hesitate to reach out to Crestcom to see and have us come in and offer a two hour leadership skills workshop. Thank you so much for listening. Don’t forget to write us a review on your favorite podcast streaming service. I’ll see you next time.

 

The post Episode 47: Practical KPIs with Bernie Smith, Author, Consultant and Trainer appeared first on Crestcom International.