Key Performance Indicator Tracking: A Comprehensive View

By Les Wallace, PhD

Overall most boards do a good job overseeing financial performance. Most also monitor customer performance such as total growth and customer satisfaction. Some boards look at organizational culture data during the year. Others do broader brand tracking. Much of the “fiduciary” part of board success is how intensely and timely boards monitor these and other “key performance indicators.” As you consider how your board may be performing on this “fiduciary” oversight responsibility you might wish to think more broadly about tracking “KPIs.”

Financial performance

CU financial performance is so completely reviewed by the regulators that you’re certain to have adequate up-to-date data on performance. More advanced boards are putting the business “key performance indicators” into a dashboard format color coded for easy viewing. A dashboard can be quickly scanned and the board can parse exactly where they wish to have discussion. The balanced scorecard literature suggests seven indicators per dashboard.

Member value

Satisfaction is the level of customer / constituent “smile” relative to our products, services and functions. “Value” answers the question “do I get what I believe I need” in access, appropriateness of products and acceptability of offerings. “Speed” of service can be both a satisfaction issue and a value issue if you don’t meet contemporary standards for timeliness. What questions are you asking and tracking regarding your constituent’s value interests? These should most likely be tracked 2-4 times a year rather than only annually—in today’s business environment customer values are constantly on the move.

Strategy

Yes, we all have strategic plans. But do we have metrics providing feedback about progress that we track at least quarterly: setbacks, course changes, accomplishments, etc.? Growth, merger /partnership activity, IT conversions, new product rollouts all have calendars and progress expectations. Create a set of metrics around each strategy: completion level, measured impact as you go, budget alignment, etc. And don’t stop when the new product or service is rolled out—its strategic (e.g. partnering with a new organization, opening up services to a new market segment) so keep tracking performance metrics to see if the new suite of services is meeting your expectations for growth and diversification.

Organizational brand

I have one CU client that regularly conducts random surveys of their community and asks, “If your partner / service provider was not available to you, with whom would you reach out?” This gives them a peek into the business environment thinking about brands of similar services in their area. Do your customer surveys include some “brand” validation questions to confirm that perception matches what the board has defined your brand to be? And don’t forget to pay attention to the social media chitchat regarding your business domain and your organization specifically.

Organizational culture

Few boards track metrics on organizational culture and if they do it’s likely a once a year employee survey. What are the characteristics the board expects of your organizational culture? Highly engaged employees? Substantial investments in training? Career planning for all? Innovation? Take the elements of culture your board expects and create quarterly metrics to track how you’re doing. You don’t need to survey every employee every time to get a sense of how culture is operating. Random samples each quarter with possibly a corporate wide survey every two years may be sufficient. A good sign all the culture pistons are firing in sync is the employee’s answer to one question: “The organization assures I can be successful at my work.” You might find the following short article in this section helpful: “The Board and Organizational Culture”

Innovation / quality improvement

Innovation is on the lips of many boards and executive teams and despite the risks inherent in innovation most boards would like to see some. However, like the weather, everybody talks about it but most do little to promote and track innovation. This does not mean you have to be the first to market with a new service, product, process or idea. It does mean your culture encourages innovative thinking, sponsors innovative tests and adopts innovative ideas that add value for the member. This may involve lean process review outcomes or a novel way for the CEO to stay connected to employees (in-house YouTube?). See the article in this section “Boards and Innovation.”

Enterprise Risk Management

Boards are moving with speed to learn and expand their risk” perspective to an “Enterprise Risk Management” (ERM) scope. Investment in identifying and tracking risk mitigation has moved into the top five issues for corporate boards internationally. Customarily an ERM plan will have several (5-7) areas of review and risk testing in any given year. All of these lend themselves to tracking metrics. What progress are we making on the plan—on schedule for the year? Of the “risky” issues identified, how are we doing addressing mitigation, monitoring or other strategies? As we execute risk management strategies what is the measured impact on the process, organization, and system? An ERM tracking system is a bit more complicated than financial or customer satisfaction due to the complexity of analysis and identification of risks. It’s not unusual for a board and organization to take a good two years to learn about ERM, pilot test some initiatives and learn how to track progress.

High performance boards have an ERM committee separate from the finance and audit committees.

Sustainability / community citizenship

Sustainability is not simply an election year buzzword. Sustainability, the commitment of an organization to the community and the environment, is fast becoming a separate measure of corporate performance, brand and competitive advantage. Start simply: do you sponsor employee hours to volunteer in your communities? Do you have recycling and energy saving initiatives in your facilities? Do you build green when you remodel or build a new facility? Are your corporate cars gas-guzzlers? There are so many ways organizations can be good citizens it’s a shame we don’t do a better job of (1) measuring and tracking our contributions and (2) celebrating these within the community. Look on any Fortune 500 corporation web site and you will see a “sustainability” statement. What’s yours? How do you track it?

Governance excellence

About 50% of the boards with which I work have “governance improvement initiatives” in their strategic plan. If not before I get there, certainly afterward. All boards are trying to keep up with increasingly complex business environment, greater pressure on performance, finding competent board members, and how to envision and navigate a vibrant future. This requires adapting to new principles of high performance governance, assessing where your board is, and targeting board development overall and individually. What sights has your board set for itself? How do you track those? What about board makeup? Do you have the board portfolio of competencies you’re going to need for the future? These all lend themselves to dashboard tracking systems. You might find the following short presentation informative:

Metrics and Performance

Tracking our promise to customers and constituents within these domains is how boards meet their fiduciary obligation. Enhancing metrics across this broader range of performance assures more objective verification of achievement and earlier warnings of unwanted variations from targets. Remember, what gets measured gets improved. It may be time to enlarge the scope of your KPIs for increased performance.

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