Caution: When KPIs turn to poison

By Bernard Marr via linkedin.com   Article

KPI

“Just imagine you put some KPIs in place and instead of measuring and improving performance, they lead to the opposite: A mindless chasing of numbers, resulting in reduced performance.

KPIs (Key Performance Indicators) should be the most important measures used by companies, business units or project teams to track their progress against strategic goals. A well-designed set of KPIs ought to provide the vital navigation instruments that give everyone an understanding of current levels of performance. However, in practice, these well-intended KPIs can turn toxic. …

  • [A] classic example comes from a Russian nail factory. When the government centrally planned the economy it created targets of output for the factory, measured in weight. The result was that the factory produced a small number of very heavy nails. The country didn’t only need massively big nails so the target was changed to the amount of nails the factory had to produce. As a consequence, the nail factory produced a large amount of tiny nails.

For me, a KPI should help to measure how well we are delivering on our key goals and strategic priorities. The data generated from the KPI should then inform decision-making and where appropriate, lead to actions. …

It is really important to understand that no measure is perfect or complete. There is a hint in the name KPI, where the I stands for indicator – it indicates performance, but never provides a complete picture.

I often use the analogy of comparing KPIs to a torch. You are trying to light up a room but your torch will only give you one spotlight. The same is true for a KPI, it will only give you a spotlight and leave other parts of the room in the dark. If we have a number of torches we can light up more of the room and get a better picture. This again is similar to using a set of KPIs that shine the light on different aspects of performance.”

 

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