Full Sail Partners Blog | Building Business (12)

A Cautionary Example of Using KPIs

If a Project Manager Falls Down in the Forest and No One is Around to See It, Does the Project Manger Still Get the Quarterly Bonus?

I have been giving a great deal of thought to KPIs (Key Performance Indicators) lately.  One thought was about the idea of the unintended consequences of putting a “suite” of KPIs (KPIs are like potato chips, you can’t have just one. . .) in place, specifically for Project Managers.

How will their behavior change?  Will measuring chargeability for their project teams cause the employees to be more utilized or cause billable project to become less profitable?

Let me throw out an example.  This example is based upon a real client and provides KPI insight. The Names have been changed to protect the innocent.

Company A wanted to incentivize their project managers to produce more revenue.  So, after months of discussion and planning, the partners setup revenue targets for each PM based upon past performance and a generously favorable potential revenue prediction for the next year.  The Project Managers would be paid a bonus at the end of each Quarter for any Revenue they brought in over the projected target.  This was very generous, and all the partners agreed that this would drive business revenues higher.

Except it didn’t happen exactly the way they wanted it to.

Here is a graph showing how their revenue was before this particular KPI was put in place:

And here is the before and after picture:

Ouch!

This of course caused their accounting team to load up on antacids for most of the year.  Their KPI (and bonus program based on that KPI) had encouraged some behavior that was not necessarily good.  The Project Managers did not care about recognizing any revenue (and by extension, billing the client) until the end of the quarter, and when they did, they typically over-recognized and over-billed.

This problem caused a cascade through-out the organization.  Clients noticed and started to question why this month’s bill was so much larger that last month’s.  Average AR started to go up.  Cash flow went down.  Lines of credit had to be accessed to make payroll (and pay the quarterly bonus).

How could this have been prevented?  Looking back, it is obvious right?  But at the time, this sounded like a great idea and everyone was committed to making it successful.

1. Too much focus on one KPI is not a good thing.  They should have used several measurements that touched upon AR, Chargeability, and (Project Managers cover your ears!), Client Satisfaction.
2. Quantitative measurements are great, but we also need some Qualitative measurements in the mix.
3. Involve many different types of people in your KPI development.  Someone might have pointed out this scenario at the beginning if the partners had not developed this on their own.

Which brings me to my final point... KPIs only help if you review them frequently and action is taken based upon them.  A well designed KPI exists to measure performance and if adjustments are not made based upon them...then no one saw the Project Manager fall in the forest.

View webinar on KPI Insight for Project Managers.

The SMPS National Technology Committee 2012 survey revealed the top 3 technology topics professional services marketing and business developers would like more information on is communication tools, customer relationship management systems, and collaboration tools. The results of this study are probably not surprising.  People are on the go and are collaborating with multiple groups in different locations at a fast pace.  We have demands from work, family, and other organizations to keep track of.  The key ingredient needed is effective communication and collaboration.  

Social media allows people to connect and communicate, but one missing piece is still the collaboration and organization to get things done. A new collaboration software tool is looking to tackle this issue.  Kona is an online space for any group to privately connect, organize, discuss, and get things done together.  The tool is specifically for people involved with multiple groups like, project teams, volunteer organizations, membership clubs and even family events.  Kona keeps track of everything each person is responsible for and discussing across all spaces in one personalized place.  The current tool was developed by Deltek and is in beta.  Kona is FREE and available through the internet and also has a mobile app. 

As an example, let’s say that you are pursuing 3 proposals, you are director of an association committee, and you also need to organize your family activities.  Kona allows you to create five separate spaces for each of these items (separate space for each proposal, one for your committee, and one for your family).  You can invite separate people to each space. Those that are a part of the association don’t need to view you’re your family and proposal information, for example.  So you just send committee members an invite to your committee space.  However, you have the ability to view the discussions and tasks that occur over all 5 spaces.

For marketers, one of the biggest struggles when dealing with teaming arrangements is keeping communication in one location and making sure everyone is aware of decisions. Now you can quickly communicate through a discussion thread versus strings of emails which may or may not hit all of the right parties.  Since you can access Kona through an app you don’t have to be at your computer to join the conversation, which is great for those on a job site.  Agreed upon tasks are outlined with due dates.  You are able to upload files so the entire team can view.

The current capabilities continue to be tweaked so for those that would like to influence the development of this collaboration tool there is still time.  For those that need a way to communicate among disparate groups check out Kona (www.kona.com) and let us know what you think.  

Like Kona on Facebook: http://www.facebook.com/KonaLife
Follow Kona on Twitter: http://www.twitter.com/kona_life

To check out more features and compatibility requirements, visit iTunes: http://bit.ly/KY4JNd.  You can also search “Deltek” from your iPhone apps.  You can also view an introduction of the tool on YouTube: http://www.youtube.com/watch?v=clEEzM0RZr4.

To view a presentation, join us on July 19, 2012 at 1:30pm ET.