What's a KIPI? Explaining the Unexplained
What is a KIPI? The short answer
A KIPI is the mojo that sets a high performing organization apart from others. Intangible aspects like good decision-making, artistic and managerial expertise, reputation and relationships, intellectual capital, and the quality of the work force all influence an organization’s performance. We call them KIPIs, or Key Intangible Performance Indicators. Because these traits are, by nature, intangible, we cannot easily observe and measure them. And yet we all know how important they are. By using a statistical technique that we call “high performance frontier analysis,” we can estimate how much these intangibles play a role in setting an organization apart from others. This is a method that has helped many other industries understand high performance and the best practices that drive it.
We start by creating a level playing field, much like you see in golf, where the tees are staggered to give men, women, and seniors a more equal chance at achieving the same score. For arts and cultural organizations, we adjust the playing field for numerous organizational characteristics, like budget size and age, since we know that older and larger organizations tend to have higher performance on many performance measures. The organization’s community plays a role, too, so we adjust the starting point for those characteristics, too.
Even when the playing field is as level as we can get it, organizations still perform differently than one another. That’s where the intangibles come in. Going back to the golf analogy, it’s accounting for the fact that one golfer is simply a better golfer than another so, all else being equal, she scores better. With KIPIs, we can estimate just how much of performance was due to expertise by measuring how far a score is from what we’d expect it to be given the organization’s operating characteristics and conditions. Moving forward, we will begin to explore and understand what the secret is to success for high-performing organizations for those who want to achieve similar results. Not everyone will want high performance on every measure. Each organization will have its own sense of priorities.
The last element that we have to account for is that some differences in performance are random. One of our golfers may have teed off earlier than the other golfer and played in morning fog. An inexperienced golfer can hit a rock near the green and end up getting a lucky bounce into the hole. Even understanding the impact of expertise isn’t enough to fully understand what may be going right or wrong. Some performance outcomes are relatively easy and others are very difficult to explain.