Keeping strategic goals in focus through KPIs, scorecards

Since the beginning of the post-recession period, higher education institutions have been challenged to demonstrate that they are operating effectively and efficiently, and producing acceptable outcomes. These challenges have prompted institutions to develop metrics to demonstrate progress toward broad goals. It’s still a new business discipline for most universities, and results are varied.

Higher ed KPIsUp until now, institutions have measured performance across a broad spectrum. Measurements are frequently developed from credible, system-based internal reports and offer insights into a department’s or function’s progress in meeting a stated goal (most often an output goal — more on that later). However, this approach doesn’t usually include a process in which important institution-wide performance indicators are defined, measured and reported in a way that enables the board and senior leadership to assess operational efficiency in achieving strategic and mission goals. A more holistic perspective comes from defining key performance indicators (KPIs) that are critical to achieving the institution’s strategic goals, tracking and evaluating them, and creating a scorecard summary.

Expansion of methods, mindset produces a bigger picture
The traditional KPI and scorecard concept has not changed. KPIs are used to measure outcomes — often achievement of an operational goal (e.g., zero compliance defects, high satisfaction ratings and students’ application yield rates) or a strategic goal (e.g., the percentage of major donors giving more than $1 million, and the percentage of students admitted with SAT scores higher than 1,500). Since KPIs can measure success or failure in many different functions, they need to be summarized to give the complete picture. A summary scorecard becomes a performance improvement measurement tool.
The concept of output vs. outcomes is an essential one. Too often, measures are chosen that are activity-based, because they tend to be ones that can be easily related to day-to-day work activities. However, these metrics frequently reflect the means to an end rather than the end itself, and they do not reflect why resources are being expended (e.g., a critical measure in student services is not the number of employers brought to campus for on-campus interviews; it is the number of well-paid, timely job offers extended).

It is clear that instead of incremental activity-based achievements by departments, performance of the entire institution toward mission achievement must be measured. It’s a much bigger job, but it can be done through judicious selection of KPIs and prudent development of a scorecard.   

KPIs are still the starting point Departmental KPIs have often been misinterpreted as the building blocks of institutional performance, with success at the departmental level projected as institutional success. The appropriate use of KPIs is turning the process around to choose indicators that align departmental achievement with the strategic goals of the institution. When selecting KPIs, you must start by determining what is important to your institution (i.e., the strategic plan, an assessment of the current financial and market position of the university, and the outcomes of key institutional drivers).

The definition and shaping of KPIs must be well-coordinated and structured, involving individuals across many functional disciplines and departments. It is useful to explain to participants that KPIs are tools used to understand and measure success toward achieving goals; they are not goals unto themselves. Similarly, KPIs are not risk measurements, but they can reveal potential risks. They are intended to be easily understood and directly connected to strategic goals.

Business activities that support these goals will help determine the KPIs, and most activities will have more than one KPI (e.g., a cost indicator and an outcome indicator). Accordingly, a strategic goal may be to increase the institution’s standing in sponsored research awards. This could simply be measured by showing the increase in the number and dollar value of sponsored research awards received. From a strictly departmental view, increasing these amounts could define success. However, the amount of unreimbursed indirect costs may have increased by a rate greater than the increase in awards, and this would have to be factored into the KPI. Or the increase may be due to awards following a newly hired professor who has brought his staff with him and requires significant investments in lab facilities. Or course-load release times were increased to focus on award competition, with an impact on the KPI because of the incremental costs of adjuncts to cover courses. If KPIs are purely cost metrics, service and effectiveness outcomes are ignored. If cost metrics are ignored, the institution could be doing well in satiating demands but be overspending. KPIs are meant to measure both efficiency and effectiveness.

Input from professionals throughout the institution should be welcomed. Finance officers can contribute KPIs such as Moody’s and Standard & Poor’s financial ratios; investment benchmarks for portfolio performance; deferred maintenance ratings by Sightlines; and on-time, on-budget completion rates for capital projects. Risk officers and enterprise risk management committees can offer KPIs to identify activities that require closer monitoring or mitigation, such as crime statistics, on-campus student injuries, cybersecurity breaches, and noncompliance with regulatory or institutional policies, including whistleblower and ethics violation reports.

Each of these departmental or operational indicators is important to the managers responsible for ensuring strong operational performance in their respective areas. But these indicators can create blind spots if they are not accompanied by indicators that measure risk and activity outcomes that are core to the success of the institution as a whole. Commonly, these departmental indicators have not been linked across institutional silos to measure joint performance. What is important to the admissions staff in measuring enrollment yield may not have the same importance to the finance officer measuring the trend in discount rates and the average net tuition paid, or to the provost managing departmental faculty shortages and capacity. In all cases, the value of KPIs is in the aggregate. In this case, in order to create an institutional KPI, the outcomes of departmental branding and enrollment need to be measured along with enrollment application yield rates, tuition discount rates, student SAT and academic profiles, and achievement of demographic targets established in the institution’s strategic plan. The separate measures should be presented together and weighted to create an institutional measure of enrollment outcome.
Scorecards bring context to KPI collection Scorecards synthesize the information provided by KPIs, linking related KPIs to produce a progress score for a strategic goal.

Consider the U.S. Department of Education’s new College Scorecard site. This enhanced consumer tool designed to compare college costs and outcomes is an example of selected KPIs that do not reflect the comprehensive outcomes of an institution. Student inputs (e.g., Pell grant status, first generation and race/ethnicity), cost of attendance (e.g., net tuition and fee price, percentage of need met and student loan burden) and student outcomes (e.g., retention and transfer rates, graduation rates, loan repayment rates and post-graduation earnings) are presented in one place as a means of helping consumers learn about the affordability and effectiveness of particular institutions. However, this scorecard provides only a partial view of an institution based on a selective consumer perspective. It does not measure the institution’s success in achieving its strategic goals, the educational value and high-impact academic experiences a student receives, or the effectiveness of academic-readiness programs for science, technology, engineering and math fields. Other KPIs of interest to a prospective student or family include campus safety ratings, graduate or medical school acceptance rates, international academic opportunities, number of months until employment following graduation and internship programs, etc. These factors contribute to a unique or enriched academic environment that may be as important as the financial consumer indicators. Scorecards can and should summarize a variety of performance indicators for different user groups.

Typically, performance indicators that depict strengthening or weakening financial performance have been viewed as a goal in and of themselves. However, financial KPIs should be part of a scorecard that also weighs nonfinancial indicators such as marketplace performance, academic reputation and performance measures, facilities and service excellence ratings, and risk exposure.

For example, financial KPIs should measure operational performance, balance sheet strength and long-term viability as one score. Improvement in the financial score is one performance indicator on a scorecard that captures the performance indicators for (1) progress made in attracting a certain cohort of students and in other market position goals, (2) the increase in academic reputation and instructional performance, (3) risk exposure, (4) facilities excellence and program effectiveness, and (5) excellence in student and research services and support.

Other performance indicators linked to strategic goals can be developed from underlying departmental and interfunctional indicators and summarized on a balanced scorecard to reflect institution-wide KPIs. An essential component of this effort is building bridges between the academic and corporate silos of an institution to assess business and academic activities through different lenses. This is best achieved if the information is supplied through institutional systems and not ad hoc or shadow systems.

Match KPI and scorecard development to goal and business model evolution Defining and measuring new institution-wide performance indicators may take a few years, and scorecards will reflect updated KPIs as institutions determine how to measure goals and define success. This evolving approach allows for flexibility as goals and business models change over time. It also provides an institution-wide assessment of achievement and targeted areas for continuous improvement.

Institutions tend to manage what they measure, and in the absence of clear performance reporting responsibilities and well-defined metrics, managers measure what they interpret success to be. For appropriate measurement of your institution’s performance, identify individuals with the skills and ability to work effectively with multiple university functions and personnel, and provide them with the well-defined indicators to be measured so that performance can be monitored and scorecard ratings developed. These individuals must be able to socialize measurements and ratings among departments and functions. They will be responsible for ensuring the accuracy of the data supporting the KPIs, knowing that questionable data can undermine the entire effort, or worse, lead to erroneous judgments and decisions.

Continuous refinement of KPIs and objective analysis of the direction in which the data point are essential for an institution to sustain the benefits of measuring and reporting performance. KPIs and scorecards must become integral to every institution’s operating and governing model, guiding the institution toward its goals.