Sandy Kemsley's Blog - The Need for Goal Alignment
Sandy Kemsley

The Need for Goal Alignment

By Sandy Kemsley

Read Time: 4 Minutes

I work with a lot of organizations that are starting on the journey of managing and automating business processes and decisions, and the matter of key performance indicators (KPIs) always comes up in our early discussions. Every organization already has KPIs, even if they’re not automated: corporate goals such as net revenue and growth; operational targets such as compliance and cost per transaction; and employee performance measures such as transaction volume and quality. Implementing systems to manage and automate processes and decisions doesn’t change those KPIs, it just makes it easier to collect the data needed to calculate them, and provides visualization tools to see if targets are being met. But most organizations take the opportunity when automating processes to see if process improvements can be made through task automation, automated decisioning, parallel work processing, remote access to work and other features provided by the platform. It makes sense that these reengineered processes are focused on meeting or exceeding the targets set by the KPIs, but organizations also need to consider if they are even using the right KPIs in the first place – otherwise, they’re just going to reach the wrong target a bit faster.

A crucial consideration is that KPIs are different across the levels of the business hierarchy, and many organizations lack alignment between KPIs at different levels. This is where business architecture comes into play: not a months-long, full-fledged business architecture modeling exercise, but a specification and alignment of KPIs at each level of the hierarchy. Although the different levels in an organization can vary, larger companies usually have a goal structure similar to this:

I use the following general technique to establish an aligned set of requirements at multiple levels in an organization:

  • Determine high-level business goals and KPIs through interviews with the senior stakeholders. This provides input to the definition of the strategic corporate KPIs as well as those of the business capabilities where those are aligned with specific business units.
  • Determine operational management requirements and KPIs through interviews with operational managers and direct observation of operations teams. These include goals at the business unit/capability level, processes within the business unit, and individual performance metrics for workers.
  • Fine-tune task KPIs by observing current procedures and pain points through job shadowing of operational workers as they perform their daily work. In addition to the individual performance metrics stated by the team managers, the methods observed are likely to expose unwritten goals as well as the ability of workers to achieve their KPI targets..

The lower-level KPIs should always be directly traceable to higher-level KPIs in order to ensure goal alignment at all levels in the organization. Without this alignment, the performance measures at the lower operational levels – particularly those focused on individual rather than team performance such as transaction counts – can end up working against the higher-level corporate business requirements. Equally important, if a corporate-level KPI can’t be traced down to a lower-level operational KPI, there may not be any actual work being done to achieve those corporate goals.

Let’s consider an example from the insurance industry, drilling down to a specific talk to triage first-notice-of-loss (FNOL) forms that arrive in the claims management department to initiate a claim:

Organizational level Description Typical KPIs
Corporate purpose Provide property insurance services to homeowners Revenue, competitive differentiation, time to market for new products, customer retention, compliance
Business capability Claims management unit Settlement amount, time to resolution, decision fairness, processing cost, customer satisfaction
Business function Claims creation process Time to respond, level of automation, decision transparency, accuracy
Task Triage and classify FNOLs Time per case, data entry accuracy, adherence to rules

Typically, someone reviews each FNOL form, looks up the related policy to ensure that coverage exists for this claim, follows up on any missing information, then finally creates a claim within the claims management system that is assigned to a claims adjuster. There are regulatory standards limiting the length of time before the claims adjuster must contact the customer, making the FNOL triage task a time-critical step in the process of creating a claim. Also, speed and fairness of claims has become a competitive differentiator for insurance companies since customers share their claims experiences online, which impacts policy sales.

The workers assigned to triaging the FNOLs are measured on processing speed, which in turn can be traced to the time to respond KPI for the claims creation process, then to the time to resolution KPI for the claims management unit, and eventually to competitive differentiation and customer satisfaction goals at the corporate level. But if the worker is only measured on speed, the accuracy and quality of their data entry and decisions are likely to decrease, which will mean that higher-level KPIs for accuracy and customer satisfaction will suffer. This is why it’s just as important to trace down through the KPI hierarchy as up: each KPI at each level needs to be connected in both directions within the hierarchy.

In general, everyone agrees that it’s important to have performance goals in order to manage business processes. What they may be missing is that it’s even more important to have those performance goals linked within a cohesive hierarchy of KPIs. After all, if the front-line workers and the business area goals aren’t aligned with corporate goals, how can we expect to successfully execute corporate strategy?

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