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Setting your 2020 KPIs – think things through first!

- December 17, 2019 2 MIN READ

No doubt, every Small Business owner reading this article is looking into their crystal ball to try and decipher what 2020 will bring. There’s never any certainty, but we all have the power to do some predicting. However, it only works if we exercise our minds and really think things through.

We need to put our 2020 plans through some rigorous testing that goes beyond their initial appeal and predicted outcomes

We had a perfect example of this during the Federal Election in May 2019, and it involves cane toads. It was a proposed plan completely divorced from reality, with seemingly no attempt to see beyond the first, superficial level of thinking. A complete absence of thinking things through.

We all know that cane toads are a curse on the Australian environment. They are highly toxic to other animals, both native and non-native, and have been responsible for several extinctions of our wonderful wildlife.

This politician’s solution was to pay a bounty of 10 cents for every cane toad captured and handed in. At first glance, you may think, “What a good idea. Kids can earn some pocket money, and it will help the environment.” Apparently the unemployed were to be co-opted into the collection as well.

But if you stop for a moment and think things through…

As something of an entrepreneur, I immediately saw an opportunity. Rather than staying out at night chasing toads around the garden, I could set up my very own Cane Toad Farm. Given that the cane toad’s prolific reproduction rate is the cause of the problem in the first place, I’d be raking in the (Government) cash in no time.

Before you think ill of me, I would not put those thoughts into action. However, I can guarantee that:

  • plenty of others would see the same opportunity, and
  • some of those people would waste no time in establishing their cane toad farms.

I could cite many, many more examples of Government projects blowing up because the planning process didn’t go far enough. Remember the Pink Batts Scheme?

Now, bring your thinking down from Government to company level. Here, one of the best places to see ‘Not Thinking it Through’ behaviour is in the design of KPIs, Performance Measures and Rewards.

We don’t have to look far for an example. The Banking Royal Commission revealed a litany of unethical and even illegal behaviour – all encouraged by performance measures and the rewards schemes built around them. If you receive a bonus when a customer takes out a loan or buys a superannuation product, what are you going to do?

Dysfunctional KPIs are everywhere

Not all KPI failures are as obvious as the finance industry’s bad behaviour. The dysfunctional effects are often much more subtle, and take longer to manifest themselves. I have seen project managers almost come to blows over cost allocations to their projects because their rewards were related to project profit margins. People would run vehicles until they were almost out of fuel so the fuel cost would be allocated to the next project using the vehicle. Yes, really.

As we head into 2020 I implore you to practise your ability to think things through with these two steps…

  • For every action for your business, take the planning process those few steps further. If we do this, what other things could happen as a result?
  • Review all your Performance Indicators. Do they encourage productive and profitable behaviours, or are there some cane toad elements waiting to surprise you?

 

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