Unlocking Performance Excellence: Mastering KPIs

The original notion for a Key Performance Indicator dates all the way back to the early 20th Century, when Frederick Taylor (perhaps the world’s first Management Consultant and the Father of Scientific Management) started using data outputs against key targets to improve efficiency and productivity in industry.

However, it was until the 1950s and 1960s that the concept, and terminology of Key Performance Indicators (KPIs) that we recognise today came into being, thanks to another titan of the consulting world, Peter Drucker. Drucker’s approach was to use predetermined objectives to measure performance and therefore understand how it could then be improved. 

It took until the early 1990s for KPIs to evolve from a largely financial-based concept, and cover all areas of an organisation, including internal processes, customer interactions, and, perhaps most importantly for Procurement and Supply Chain, how suppliers were managed. 

Are We Doing KPIs Right?

As ready access to data has expanded, so has the use of KPIs to measure almost every possible interaction and process. In many cases, Procurement teams have put KPIs to good use, producing data to assist with key areas such as SRM, Category Management, supplier segmentation and many others. 

It has also enabled Procurement to produce hard proof of its positive impact on organisational strategy and even, as much as we find it hard to do sometimes, celebrate its successes.

Yet many Procurement professionals would say, when pressed, that KPIs just don’t work for them. Any professional who has been around for a while can recognise the common pitfalls:

  • Metrics are too vague and don’t align with the strategic goals of the business.
  • Trying to use too many KPIs, leaving key people bogged down in admin.
  • KPIs that are measuring the wrong thing.
  • KPIs measuring key areas, but with poor outputs or unusable data.
  • Data that is generated is too complex to do anything with, so it gets ignored.
  • A lack of systems or technology to help track performance management.
  • A lack of clarity over why they are being used, leading to disputes or the souring of stakeholder relationships.

Done badly, KPIs become a purely bureaucratic exercise that is a drain on time and resources. People end up doing as little as they can get away with, leading using KPIs because it’s expected, rather than as a task that can add real value. 

It shouldn’t, and doesn’t have to, be like that.

Evolving SMART KPIs

The issue is that people try to make KPIs too complicated, failing to see that the key to great performance management lies in simplicity. 

Organisations want to be able to measure performance, both internally and throughout its supply chain. This is where Procurement teams can take the lead, ensuring that they have the skills required to craft clear, concise and effective KPIs that measure the right factors, as well as providing actionable data and a clear path to success.

These SMART KPIs help Procurement focus on what truly matters for the business and are geared toward real-world impact, fostering dispute-proof designs for enhanced focus on performance. Although it may sound complex, with the right input and knowledge, you can ensure that you help your organisation set the standard for excellence.

This article was written by Dr Sara Cullen, Managing Director, The Cullen Group.