CSO and the KPI

July 30, 2012

Steve McCoy-Thompson, Director of Operations, BSR

The Key Performance Indicator (KPI) has assumed almost mythic proportions in management circles. Only what can be measured, so the thinking goes, can be managed. This is not entirely true, as we’ll discuss later. And just because something can be managed, such as a lunch break, does not mean it’s worth measuring. But for now, let’s ask: Where does CSR fit in this measurement equation? The answer is both inside and outside.

Inside the organization, KPIs are designed to measure internal performance. They measure the productivity of people and machines, systems and processes. CEOs and CFOs take these measures seriously as they guide where and when to invest, as well as where to reallocate or even cut resources. Too often, however, KPIs measure the wrong things, and sustainability is not exempt. 

A company, for example, can measure the number of calls processed per hour, but do shorter calls build a customer base? Likewise, a sustainability office can measure the carbon output per employee, but does it change behavior in ways that help the business? The answer to both questions is: maybe. And this is where the “outside” market-facing half of the equation comes in.

In many respects, the purpose of a company is to deliver what people want. This is far more complicated than it seems, of course, as it involves questions of value, cost, impact, and so on. But the simplicity of this phrase does help to keep the KPIs focused. Does an indicator actually improve service delivery? Does it influence customer demand or help produce what people truly want? If not, the KPI may be misplaced. 

So what does all this have to do with sustainability? To quote my third blog, the only way for corporate sustainability to succeed is if the corporation succeeds. Or, to paraphrase Bob Dylan, “Without you I’d be nowhere at all.” So it only makes sense that both sustainability and business indicators should lead in similar directions. Lower energy use can lower costs as well. Better labor practices can raise productivity. Lower carbon emissions can improve public goodwill. So measure real impact, not just metrics, and the KPI truly makes sense.

At the same time, everything important is not necessarily measurable. We should never underestimate the power of inspiration or aspiration to motivate real change. The good news here is that sustainable goals are often aspirational, as they seek to effect change for future generations. Case in point from BSR Managing Director, Dunstan Allison Hope, who once appealed to a Chief Procurement Officer with a pile of data on the business benefits of responsible procurement, only to be told: “This is all the same-old business case–what matters to me and this company is the ethics case and doing the right thing. If I find any suppliers breaking these standards, that’s just wrong, and I’ll chew them up.” Clearly, so-called “soft” sustainability goals can carry as much bite as hard indicators. 

In the end, as with diet and sleep, balance is the best approach. KPIs can help decision makers wade through a deluge of data and highlight what is most important to business success. The extent to which sustainability measures are aligned with core business metrics will help CEOs and CFOs equate good intentions with sound financial practices. Yet, staff and customers cannot live by metrics alone. People are the heart of change, and change is usually sparked by appealing to the heart. Success is met when metrics perpetuate the momentum of first change. And the “right thing,” which lies at the heart of sustainability, can be made right on a sustained basis when aligned with the core measures of business success. 

In the next blog in our series, we will return to the phrase “Deliver What People Want” and discuss what this means both to the organization and its sustainable programs.

This blog is the fifth in a series on organizational structure and sustainability, from the perspective of BSR’s Director of Operations. The first is on the role and placement of the CSO in an organization. The second covers strategy and the integration of sustainability into the business model, and the third examines how to establish a common organizational language for successful sustainability outcomes. The fourth blog discusses the critical relationship between the CFO and the CSO.

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