A Job Done Well - Making Work Better

KPI's - Your Optional Unfair Advantage With Bernie Smith

• Jimmy Barber, James Lawther and Bernie Smith • Season 2 • Episode 24

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This week, we are joined by KPI Guru Bernie Smith - world-renowned expert and author of 21 books...Bernie has made a career out of successfully helping people from across the globe to identify how they use KPIs to unlock performance. 

In this first episode, Bernie shares how to identify the KPIs that will give you the edge with practical insights and engaging stories. It is hard to believe that KPIs can be so interesting.

And, of course, we'll get another dose of middle class smugness from James as his Volvo and its heated seats give him the edge this winter!

Next week, Bernie will be back to help us unlock 'gold bar' KPIs

Intro:

Hello, I'm James. Hi, I'm Jimmy and welcome to A Job Done Well, the podcast that helps you improve your performance enjoyment at work.

James:

Good morning. How are you?

Jimmy:

Good morning, James. How you doing?

James:

I'm very good. Thank you very much. I'm very excited. We have got an analytical fest for you today. Um,

Jimmy:

just excited because now I'm outnumbered by analysts.

James:

yeah, so there's two great things about today's podcast. We're going to talk about numbers and Jimmy's going to be out of his depth. So we will shut up. So I'm really looking forward to it. Um, we have a

Jimmy:

when, when has being out of my depth ever shut me up? Let's rewrite.

James:

true. So we have a special guest today, and that guest is Bernie Smith. Uh,

Bernie:

Thank you very much. Good to be here.

James:

So, Bernie, would you like to just, introduce yourself, tell us who you are, what you do, and why, anybody probably

Bernie:

Okay. That's, that's a big challenge, but I'll, I'll try. So I'm Bernie Smith. I'm a, reformed engineer started life in the power industry, doing what's now called Lean Six Sigma, um, before it was actually called that. So a long time ago, but operational improvement, big FMCG, you know, continuous manufactured goods, uh, processes all around the world, mostly focused on problem solving and kind of improving operational performance. loved it, but didn't like being up at six o'clock in a paper mill in the Midwest, you know, for three months at a time. so I hopped the fence, um, a few years into that and took that toolkit and applied it to, financial services did that for a few years. And then, um, about 18 years ago, Sat down and realized that there were common themes in those two very different sectors. I noticed people being confused, frustrated, about what to measure and how to measure it. Lots of arguments, lots of friction. and I noticed amongst my consulting colleagues as well, they would skip through. The KPI measurement, but they do it manually just so you can get to the good bit, which is finding opportunity and solving problems. Uh, so I realized that, you know, where there's muck, there's brass. So I set up made to measure KPIs. I wrote my first book, um, KPI checklist, and I spent the last 18 years just nerding out, just focusing in on what do people find difficult, frustrating, or annoying about choosing and implementing KPIs and measures. And how can we make that easier?

James:

So you are an, you are an analyst analyst, Bernie, isn't that right?

Bernie:

I, I couldn't comment.

Jimmy:

And Bernie, you said you wrote your first book. Does that mean there are a number of

Bernie:

There are 21, um, 18 of which, yeah, 18 of which have got the charisma of a phone book, but are useful tools for a particular job. I've also written three what I call proper books.

Jimmy:

I was sure he was just going to wave the yellow pages at

Bernie:

Yeah,

Jimmy:

there.

James:

Cheers. I tell you, Jimmy is looking so excited about those books, you

Bernie:

of course, of course.

James:

of them and I will make sure he reads

Jimmy:

the reason why, one of the reasons why I'm excited is because, usually James is our resident bestselling author and you, you've written 20 books more than him. So he's got, he's got his work cut out for this

Bernie:

I have got a significant head start in terms of time and yeah, uh, word count.

Jimmy:

and analytical prowess, no doubt.

James:

Quality, not quantity. Right, anyway, yeah,

Jimmy:

James, what, what have you been up to recently?

James:

I have mostly been scraping ice off the car. Minus five degrees C in Nottingham this morning. everybody else is under floods and under, feet of snow. Not here, it's just a bit bloody cold. But it is so cold I have, resorted to putting a vest on. So there you go, there's a nice mental image for you.

Jimmy:

James, you're the only person I know who wears a vest, but I also, I also have, uh, had the pleasure of editing a couple of our episodes of our podcast recently, and noted the fact that James regularly mentions the weather. And, uh, his Volvo's, it's usually his Volvo's ability to overcome the weather.

James:

Well, yeah, but the smug middle class satisfaction in owning a Volvo, I tell you my heated seats were amazing this morning. Built by Scandinavians for Scandinavians. Can you not see the sort of Nordic good looks? And what have you been up to

Jimmy:

Well, we're getting into 2025 and one of the things I've noticed is, the usual flurry of people announcing their new jobs for the new year. Quite a few people taking steps out of a big corporate jobs and, looking to do something different with their lives, which I thought was a, you An interesting trend that I've, uh, started to see,

James:

Oh, I don't think that's a trend, mate. it's age related. Bernie, let's just start. We know why do we need measures in business, just start with some really basic stuff?

Bernie:

I find that the world roughly divides into two camps, people who believe in measurement as a way of managing a business and people who don't. Um, now a bit of Darwin shows that the ones who believe in measurement tend to get on better. But put very simply, if you don't measure stuff, you're guessing, for a very small business, you will have enough first hand input to your brain that you can probably form a lot of a reasonable judgment of what's going on, But at some point, the people making decisions become sufficiently removed from a lot of the key activities that they need information. And, anyone who's, who's read Daniel Kahneman knows that we're all biased. Our filters don't really work as well as we think they do. So you need some kind of objective method to help your decision making. So for me, KPIs, metrics, measures, whatever you want to call them, they are the trustworthy tools for decision making. They're not. the whole world. but they do provide this objective bedrock that will inform your decision making. Now that's the slightly negative way of looking at it. I actually tend to look at KPIs and think of them as your optional unfair advantage. So if you've ever watched, Back to the Future, I think it's the first one, um, where Biff goes back in

James:

Showing your age there, Bernie.

Jimmy:

Oh, he finds

James:

Showing your age.

Bernie:

Yeah, the sports almanac. So Biff goes back, gives it to his younger self and Biff the elder, blonde hair, megalomaniac, big gold sweep, um, goes through his life just having stellar luck betting. Now that's the kind of unfair advantage that when you choose a KPI, it won't give you that, but it can get you some of the way towards that. there is this handful of game changing measures that if you can pinpoint them and make them measurable, we'll just, scare the living daylights out of your opposition and help you become dominant in your field. they are hard to find by definition, and they're often extremely difficult to measure as well, or apparently look impossible to measure. We, we, we just push them to one side and completely overlook them. And that is where all the glory and excitement really lies. As far as I can see.

James:

you've got a, a method where you create a matrix and you talk about importance versus ease of availability.

Bernie:

These are measurement versus. Absolutely. So I shortlisting matrix. Um, so, so your first step is to figure out the outcomes that you want. Now, that's a deceptively important step. Most businesses think they know what they want to happen. It's surprising how many disastrous conversations I've witnessed where, where companies actually struggle to do that beyond making a profit. Most commercial organisations want about six things. Make a profit whilst not running out of cash, um, growth, innovation, meeting their ESG requirements increasingly, managing risk, staying legal and compliant. those are typically the things that, That we want to happen. So those, those are kind of the foundations on which we build everything else. It actually gets more interesting the next level down on the KPI tree. So we take those what I call big six objectives, possibly plus a mission based one as well, break it down into a hierarchy with the outcomes that we want. So not finance, HR and so on, but things like, we're, we're seen as a technical innovators in our market or customers love us or whatever it is, you know, things that we want to happen. We break it down through a couple of layers till we get to really tangible things. And then we figure out how we can measure that. Now that's a, a really Divergent process is not uncommon to produce six, seven, 800 KPIs. These are things that you could measure. And no one's saying measure 800 things, but what we then do is we put it into that matrix that you were talking about, which is shortlisting matrix. It's a, a grid.

James:

Well, sorry, sorry, I need to come back on you here. It's funny you say that. But I have, seen packs with, I should imagine, getting on for 800 metrics in there. So there is an element of people do take all of this stuff and throw it at the wall and see what sticks.

Bernie:

there's basically an endless wellspring of data in any organisation. I worked in one call center where a team lead was supposed to look at 128 KPIs with his or her team. a call agent. It's a nonsense.

Jimmy:

what I've seen in a number of organisations is where they measure everything that

Bernie:

yeah, absolutely. So you end up just in this morass of KPIs. And it's a bit like, photos, you know, when you take, if you take pictures on your iPhone or back in the old days and on film, you've got a pile of like 400 photos. It's incredibly emotionally and mentally taxing discarding them. I learned, I learned a few tricks from, from having a bit of a photo habit, which is you don't choose which ones to get rid of. You choose which ones to keep. And that's, that's a very different process. So that's exactly what we do with KPIs. So the KPI tree gives us, it, it scratches the itch, which is have we missed something? Because this was one of the, Problems I kept on bumping into with KPI selection, someone always go, what about, and then throw in another KPI and there'd be another unstructured debate about whether we should measure or not. So it's kind of bring out your dead moment. You build a KPI tree and you say, right, we're going to put everything we could conceivably want to measure on here. Do it now, we're not committing to measuring it, but then it's in our universe from which we are going to choose our KPIs. There's two types of people in most organisations. There are dreamers and pragmatists. Now, the,

James:

We call them Jimmy and James.

Bernie:

so, so the dreamers tend to be senior managers who don't, Pay the price if you like for measurement. they assume that it'll just happen There's no cost or effort required Then you've got the pragmatists who are typically systems people technical people and then the ones who go rigid when you ask them to measure something because they know how hard it is and they want to get the list as short as possible. the challenge is keeping both parties happy. So I say, look, if you're a pragmatist, you're going to find this really offensive because we're going to talk about six, seven, 800 KPIs and you're going to be really, really concerned. And I think the process has failed. Don't worry. In a minute, we're going to come along and actually cull those, probably get rid of 90 percent of them. And I say to the dreamers, the KPI tree, this is your chance to just go wild, but please bear in mind, we're going to murder quite a few of those KPIs. So we kind of have two steps. One's tailored to dreamers. One's tailored to pragmatists.

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Jimmy:

it's definitely, it's definitely you and me, James, in there. But, Bernie, back to something you said earlier, which I think relates a little bit to the, the dreamers versus prognosis is the, dreamers often are not that interested in KPIs at times it can be more like, I have an opinion on what we should be doing. I have an opinion. So you get ego plays into it. So do you need evidence for ego? A lot of people don't need evidence for their ego versus those people that want to measure everything. And wouldn't it be interesting if we looked at this measure, and this measure, and this measure? So how do you allow in your process for the ego of particularly senior people who think that they know the answer, they don't need the data, they know the

Bernie:

Well, that's, that's why every step of the way. of the process it's collaborative. So one of the key things is I talk about these KPI trees. I never build them in isolation. I always build them with a client and I do it through questions. So I'll do the mechanics building the tree, but we'll start with questions like, what does a good day look like? What does a bad day look like? Followed up with Why is that good? Why is it bad? And we'll start to tease out outcomes that people are looking for. Now, Jimmy, you, you just talking about ego and not being interested in measuring things. I think there's actually probably two subsets within that group. There are people who genuinely don't believe in measuring stuff. And typically I'm not going to persuade them. No one is. And you've got to ask, are they the right people for that job? But there are also people who think in terms of very broad outcomes. So they don't think in terms of the nuts and bolts of how you get there. But they're very interested in a great customer experience or super fans or whatever it is. Um, and they're really good actually because what they can do is they can get some of those higher level blocks on the board. And we're talking about outcomes here, not KPIs. So things that we want to happen and then we can break it down into the mechanics, you know, what drives that. And then what can we measure that shows what drives it. And the other good thing is it is all focused on developing a diagram, a tree. So it, it takes the ego out of it. If you've got two people having a ding dong about KPIs, it's great. You know, is my idea better or is your idea better? Whereas when you build a KPI tree, it's focused on let's get the KPI tree right. Now, I wish I could say I designed it like that. I kind of discovered it by happy accident, but if you've got people all huddled around working on this, everyone's focused on building the tree. They're not focused on arguing. However, By the time you've finished, everyone has got a stake in that tree. Everyone can see the bit they contributed, the bit they won on. So you end up with a much higher level of agreement and buy in than I've achieved through any other method. So by some happy accident, I discovered it's actually a great way of building, um, building buy in, building, building agreement. And it helps that it's visual and it helps that you build it in real time.

James:

mate. Yeah,

Jimmy:

tree. so some of our listeners, will be running organisations. Some of them will be running units. A lot of them will be managing an individual

Bernie:

yeah,

Jimmy:

Um, can. this method apply to all of those scenarios, or does it work better in some or

Bernie:

no, it has to, it has to work in all because ultimately everything you do in an organisation has to be aligned towards the same outcomes because if you don't, then if, if you can't explain why having happy customers, phone calls answered quickly, isn't delivering benefit to the wider organisational goals, then why are you doing it? Everything has to join up. ultimately everything has to have a line traced back to one of these top level objectives, making a profit, growing, innovating, or whatever. And KPI tree actually creates a way of just hanging all this stuff together. This is where people really struggle because the chief execs KPIs are going to be quite different from a team leaders KPIs. K just means key and it depends on your perspective. So if you're running a team of seven call agents, you've got very different KPIs from someone running the finance department. Now they're all valid. but they're different. So the KPI tree basically provides this kind of broad framework. and then the shortlisting process, you would actually do it for different roles in the business. So you go through and look at the KPI tree, say for the finance director, and he or she would pick typically high level things around, you know, debt and cash flow and whatever. You would then also do. A shortlisting exercise for, uh, team lead in, in a call center. And they would have different KPIs around, you know, first touch resolution. And I don't know, have greater service or whatever, um, now they would have different KPIs and they're, there's different, They're both sets are important, but the KPI tree enables it all to join together. So you can see that the finance director is controlling things like we don't run out of cash. We make a profit. We have visibility of, our cash flow and so on. Whereas the team lead is down in the weeds, dealing with happy customers, good feedback scores, all of that stuff, but it's all part of the machine. So the idea of a KPI tree is you build a kind of single holistic view. They can be big. But business is a complex and it's often the first time everyone's seen how it all fits together

James:

So once we've got this KPI tree them you then get into a question of Not all measures are equal, so on the one hand you've got how useful is this measure, but on the other hand you've got how, um, how easy is it to get it. Yeah,

Bernie:

So we end up, we end up with four quadrants, very simplistically, they're scored one to 10. So you get something called a ranking score where you multiply them together. So anything which has got a hundred, it's, it's a no brainer. So things like cash in bank, very easy to measure. Super important. So great. We're just going to do that. And those are the things that you don't debate too much. And they go, they, they go on the, on the board. Um, things that are difficult or impossible to measure and trivial. That's easy because typically that's just empty. They typically don't make the KPI tree. So then we have two other quadrants that are really interesting. the easy one to deal with is easy to measure, but not that important. Now we were just talking there. You were talking. James about 800 KPIs in a management pack, huge numbers of those KPIs will be in the measurable, but who cares category.

James:

I think that really is a curse. Because people they don't understand, because they haven't done the work. Which of those measures are important? And then they end up measuring things which are pretty much the same. So, I don't know, if you're in a call center looking at abandon rate, the percentage of people who hang up versus average time to answer, how long are people in a queue. It's the same flipping measure, but people just get into endless tailspins about it.

Jimmy:

The danger I find is that when you start writing down these KPIs, even if they are, they're easy to get, but they're not important. You put them in the KPI report and next thing you know, everyone thinks they're important. So stuff that gets written down automatically is important in a lot of organisations.

Bernie:

they're really hard to get rid of. It's back to the photos thing. so for me, that quadrant, They're ripe for being culled, let's reduce the cognitive load, the production effort, and just get rid of all that cruft, and just focus in on the handful of ones that give us genuine insight, or if we need to roll them together into a single index KPI. So just like your engine management system takes all that diagnostic stuff and turns it into a Amber stop now, or no light. You're good. You might want to consider that, but it's, I think of those KPIs as the vine weed that chokes an organisation, on its own, maybe not showstopper, but when, you're constantly pounded with unfathomably large reports. Eventually you just lose sight of what's important. You just drown in drivel.

James:

well, some of that drivel is somebody's job. Anyway, moving on,

Bernie:

Well, that's, that's where you get onto your final

James:

as near as a problem in its own

Bernie:

That's when you get onto the final quadrant. This is what I kind of call the gold bar quadrant. This is where the really, really interesting stuff lies. So these are things that are game changingly important sometimes. but appear to be impossible to measure. Um, now what happens here, for many organisations, if they haven't been through the KPI treat process, they often won't even think about these. But if you've been through a KPI treat process, you might come up with something, for example, understanding what your customer intends to do. Okay. Now, behavioral intent is fantastically difficult to measure. directly anyway. And it's also really, really useful. if you know what someone's thinking or configure it out, we know what someone's going to do, then it gives you this massive, headstart. And if you look at some of the big businesses that are floating around these days, yeah, Google managed to crack the easy to ask, but difficult to answer question. How relevant is this page to this query? That's the whole premise of, of Google search engine, matching the intent of a query with a particular web page. And what I think it was, Larry Page, um, figured out was you can't measure it directly but there is a proxy, which is the number of links. Now, That was pretty rudimentary, but it was enough to make Google a monster. It is now, now that I think he's 650 different parameters, but the idea was you can't measure relevance directly, but you can look at keywords and at links and you can start to infer. What it is you're interested in. And when you look at this, there's a number of businesses out there where they've basically been built on measuring hard stuff. So this gold bar sector, um, hard to measure or apparently impossible to measure, but really important. This is where I've seen clients storm through and go, we can't measure that. Forget it. And they just focus in on the more operational, more measurable stuff. and that's, that for me is a missed opportunity. how do we handle, those KPIs that sort of flash up in the top left hand corner of our diagram?

James:

Now at this point, we came to the conclusion that after 20 odd minutes, there is only so much that people can listen to about metrics. So we cut Bernie short in, full flights. there's his tips on how to select your metrics. but next week we'll go on and we'll discuss, his gold bars and how you get your arms around those.

Jimmy:

Excellent. We always need some gold bars. Looking forward to that.

James:

All right. Speak to you next week.

We cover a whole host of topics on this podcast from purpose to corporate jargon, but always focused on one thing, getting the job done. Well, easier said than done. So if you've got. Unhappy customers or employees, bosses or regulators breathing down your neck. If your backlogs are out of control and your costs are spiraling, and that big IT transformation project that you've been promised just keeps failing to deliver, we can help. If you need to improve your performance, your team's performance, or your organization's, get in touch at jimmy at jobdonewell. com or james at jobdonewell. com

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James Lawther

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Jimmy Barber

Co-host
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Bernie Smith

Guest