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A KPI needs to be owned by a single owner. For most of the KPIs, it’s possible, but there are KPIs, where there are multiple functions contributing to its success. For example- Let’s take a metric, 'average cost of processing each home loan application'. The success of this KPI is linked to operations functions (for having cheaper operations), risk & credit function (to have balanced underwriting policies to optimize rejection rates) and sales function (to get clean home loan applications, to get credit worthy home loan applications and also to get more home loan applications).
Now the question is on how to assign a single KPI owner for the above example. Typically, within an organization, people would like to be held responsible for their part of work. The reality is that as the organizations move towards aggressively working more on 'effectiveness' (productivity/averages) than the volumes (total sales numbers...), the cross-functional linkages around KPIs only increase. Here are some methods that you can employ to assign a single owner of a KPI, while still having a manageable political re-bound. We will be referring to the above said example.
- Empower the KPI owner: One needs to empower the KPI owner, so that he can hold the 'contributing functions' on accountability towards their piece within the KPI. For example, let’s say that the head of Ops is held responsible for this KPI (as in the above said example). In that case, he should be able to connect with other functions and ask for the 'what, why...' aspects of their performance related to the KPI.
- Set-up underlying assumptions: If you set-up a standard for each individual component, behind the KPI, it helps. For example, you can set-up standards for processing cost for each clean and unclean application received, the %age of rejections (ops), given certain mix of portfolio (risk), sales volumes (sales), %age of clean and complete applications (sales). This will help the KPI owner to manage the show.
- Assign a more senior KPI owner for cross-functional owner: You may assign this KPI (as in example) to say COO instead of leaving it with head of Ops. The reason is that COO will be having higher gravitas. The other reason is that due to multi-functional ownership, he will be having a greater proportion of ownership to the KPI.
- Make the KPI skewed towards the KPI owner: One can say that the KPI in the example has almost similar contributions from ops, risk and sales. However, one can make the KPI mostly linked to Ops performance. For example:
- Ops should be able to provide richer information to risk to take a quicker credit decision.
- Ops should establish a work-flow and imaging capability to ensure that Risk is able to see the cases online along with the supporting documents.
- Ops should be able to make most of their cost as variable, by being able to respond to variable inflow of home-loan applications.
- Ops should be able to provide the ability to the field, for pre-assessing their applications on if they are complete.
From my perspective, this is perhaps the best way to manage the single ownership of KPI.
- Shift the responsibility in a round-robin fashion: This is a creative way, which I have seen in only one organization, with very interesting results. As in the above example, the key owners are Ops and sales. One can toggle the ownership of this KPI across these functions on a quarter to quarter or year by year basis. There is no harm in trying this, as it provides a good perspective to the KPI owner function of the other contributing functions.
NOTE- finally the work needs to be done. A cross-functional KPI and its management is a good indicator of the enterprise level alignment and team-work. |
