CAMBRIDGE, Mass. -- Despite the appeal of trendy technologies like artificial intelligence, one consultant is encouraging...
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CIOs to go back to business intelligence basics and rethink their key performance indicator methodology.
Mico Yuk, CEO and co-founder of the consultancy BI Brainz Group in Atlanta, said companies are still struggling to make key performance indicators actionable -- and not for lack of trying. It turns out the real stumbling block isn't data, it's language.
"KPIs are a challenge because of people, not because of measurements. A lot of problems that exist with KPIs are in the way that people interpret them," she said in an interview at the recent Real Business Intelligence Conference.
Yuk sat down with SearchCIO and talked about how her key performance indicator (KPI) methodology, known as WHW, breaks KPIs into simple components and why her research drove her to consider the psychological impact of KPI names. This Q&A has been edited for brevity and clarity.
You recommend teams should have at least three but no more than five KPIs. What's the science behind that advice?
Mico Yuk: There's a book from Franklin Covey called The 4 Disciplines of Execution. It's a fantastic book. In it, he talks about not having more than three WIGS -- widely important goals -- per team. He did a study and proved that over a long period of time -- a year, three months, six months, the typical KPI timeframe for tracking, monitoring and controlling -- human beings can only take action and be effective on three goals. Other research firms have said five to eight KPIs are important. Today, I tell people that most report tracking of KPIs is done on mobile devices. It's been proven that human beings get over 30,000 ads per day, and half of those exist on their phones. You are constantly competing for people's attention. With shorter attention spans, you have to be precise, you have to be exact, and when you have your user's attention, you have to make sure they have exactly what they need to take action or you'll lose them.
The KPI methodology you ascribe to is called WHW. What is WHW?
Yuk: WHW stands for What, How and When. We took Peter Drucker's SMART concept. Everybody knows him. He's the 'If you can't see it, then you can't measure it' guy. His methodology is called SMART, which stands for specific, measurable, accurate, results-oriented, and time-oriented. He says you have to have all five elements in your KPI in order for it to be useful. We said we're going look at what Drucker was recommending, extract those elements and turn them into a sentence structure. To do this you take any KPI and ask yourself three questions: What do you need to do with it? That's the W. By how much? That's the H. By when? That's the W. You use those answers to rename your KPI so that it reads like this: The action, the KPI name, the how much, and the when. That is SMART hacked.
Why do you find WHW to be a better KPI methodology?
Yuk: It's easier. We don't think one KPI methodology is necessarily better than the other. Using OKRs [Objectives and Key Results] are equally as effective, for instance. But we do find that having just a sentence where someone can plug in words is much faster. Imagine going to a company and saying, 'You have 20 KPIs. We're going to transform all of them.' Some of the methodologies require quite a bit of work to get that done. We find that when we show companies a sentence structure and they are able to just answer, answer, answer and see the transformation, it's an 'ah-ha' moment for them. Not to mention there's the consumption part of it. Now that you're specific, it also makes it easier to break that big goal down into smaller goals for people to consume.
You've said it's important to rename KPIs, but the language you use is equally as important. What led you to that conclusion?
Yuk: We are data visualization specialists, but when we started nine years ago we found that [our visualizations] were becoming garbage in, garbage out. We kept saying, 'This looks great, but it's not effective. Why?' We then [looked at] what we were visualizing, and we realized that the KPIs we were visualizing were the problem -- not the type of charts, not the color, not the prettiness. That led us to say, 'We've got to look at these KPIs closely and figure out how to make these KPIs smarter.' That was our shared challenge. That led us into learning more about 'right-brain wording,' learning about simplicity, learning about exactly what the perfect KPI looks like after we evaluated as many methodologies as we could find on the market. What we concluded is that it all starts with your KPI name.
What is a "right-brain wording?"
Yuk: If you go online and you look up right brain versus left brain [wording], there are amazing diagrams. They show that your right brain controls your creativity while your left brain is more analytical. Most developers use the left side of their brains -- analytics, coding, all that complex stuff. The artists of the world, the creatives who may not be able to understand complex math, they use the right part of their brain. But what you find on the creative side is that there is a cortex activity that happens when you use certain words that [are] visceral. We found that it is one thing to rename your KPIs, but it is another thing to get [the wording right] so that it resonates with people.
Let's take profit margin as an example, and let's say that after you use our WHW hack, the revised KPI name is 'increase profit margin by 25% by 2017.' If I were to ask you to visualize the word increase, you would probably see an arrow that points up. OK, it's a visual but not one that you have an emotional connection to -- it's a left-brain, analytical word. But if I ask you to visualize a right-brain word like grow, I guarantee you'll see a green leaf or plant in your brain. What happens in your brain is, because you're thinking of a leaf, there's an association that happens. Most people have a personal experience with the word grow -- a memory of some kind. But they don't have the same relationship with the word increase. Because of the association, users are more likely to remember and take action on that KPI. User adoption of KPIs and taking action is a problem. If you take the time to wordsmith or rename the KPIs so that they're more right-brain-oriented, you can transform how your users act and react to them.
How can CIOs help make employees feel connected to top-line goals with KPIs?
Yuk: After we finish wordsmithing the KPI's name, we focus on impact. A CIO in New York told me a long time ago, 'One of the most important things you need to remember is that everybody has to be tuned into WIFM.' And I asked, 'What's that?' He said, 'What's in it for me?'
The good thing about transforming a KPI into the WHW format -- it now has the action, the KPI name, the how much, the by when all in the name. You are now able to take that 25% [profit margin goal] and set deadlines and break it down, not just for the year, but by month, by quarter and even by day. You can break it down to the revenue streams that contribute [to the goal] and see what percentage those revenue streams contribute. That's where you can individualize expectations and actions.
You tend to find two things. Not only can you individualize expectations, but you can also say, now that you have that individual goal, I can show you how it ties back into the overall goal and how other people are performing compared to you. People innately want to be competitive. They want to be on top -- the leaderboard syndrome.
Those two elements are keys to having impact with your KPIs. Again, it's a bit more psychological, but KPIs aren't working. So we dug deep into the more cognitive side to try to figure out how to make them resonate with people and the [psychological] rabbit hole goes very deep. Start with the name.
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