Canada is a hockey-loving nation and now is the time of year when performance in the National Hockey League comes to the forefront. Fourteen of the 30 sets of players and coaches are, to use hockey parlance, heading to the golf course. These teams did not earn enough points during the regular season to allow them to advance to the playoffs.
Similarly, some players will either be handsomely rewarded with new lucrative contracts or be looking for a new employer as a result of their great or poor performance over the season. Goals, assists, ice time and perhaps penalty minutes will be the set of performance indicators used to determine bonuses or future earnings.
At the same time, federal ministers are seeing their spending reduced courtesy of the March 2012 budget and Deficit Reduction Action Plan (DRAP). And every level of government across Canada and the world has seen funding cuts as a result of austerity measures. In times of reduced spending, how can governments demonstrate taxpayer value for money? This can be achieved through a comprehensive set of performance indicators (PIs) clearly linking activities to outcomes.
Conventional wisdom is that a PI should be SMART – Specific, Measurable, Achievable, Realistic and Timely. The Australian government takes this one letter further, and appends “Agreed” to the end of the acronym, to ensure that all stakeholders are aligned, which helps make Australian indicators a little bit smarter than those that we are accustomed to in Canada.
Obtaining agreement on PI targets is critical to those who are accountable for achieving the objectives; the SMARTA model helps to realize this.
An individual PI is most useful if aimed at a specific area. A set of PIs will be far more beneficial to measure the overall success of a program and its outcomes. To build this set of PIs, ask yourself this question: is the set of PIs mutually exclusive and collectively exhaustive (MECE)? That is, when the PIs are grouped is there no overlap (mutually exclusive) and when combined, do they cover all possible options (collectively exhaustive)? This will identify any inconsistencies in the performance measurement framework.
All too often we see sets of activities and outputs linked to a set of strategic outcomes with little or no explicit logic in the middle. Essentially we are “waiting for a miracle to happen,” expecting that our day-to-day activities will somehow give rise to the expected strategic outcomes. We offer five design principles to combat this problem:
Using these five design principles will result in a comprehensive set of performance indicators that are balanced and clearly link activities to outcomes. This may not help you with your next NHL contract negotiation, but will ensure that the true value of your organization is clearly demonstrated to your stakeholders.