Is business now KPI mad? In fact are organisations KPI or metrics mad? Just finished reading ‘The Tyranny of Metrics‘ by Jerry Z. Muller. And it does give reason to think again about the curent obsession with KPIs and ‘if you can’t measure it you shouldn’t be going it’.
Muller provides a good background – why we have seen the focus on KPIs. And it’s not a new phenomenon. It seems attractive to professional managers – if we can figure out what’s important to the performance of the organisation or company why not measure that? To some extent the various reporting processes – annual inancial statements, monthly management accounts, variance analysis against budget and/or forecast – are all part of this measurement process.
Key performance indicators
Key Performance Indicators (KPIs) seem attractive – capture the essence of performance in a discrete set of numbers (preferably calculated automatically). But unfortunately some of this attraction is the weakness. Selecting a KPI which is calculable – but which may be too simple to measure what si actually a moe complex process. And lot’s of important activities may not lend themselves to trasditional KPIs at all.
Cross industry challenge
Muller does a good job of looking through different industries and sectors – be they health, policing, univestities, etc. Ineach case he points out eamples where the metric is not comprehensive or causes people to game the metric. Almost more worrying, he lists lots of exampels where the metric causes sub optimal behaviour.
Conclusion
So what’s the answer? Do we stop measuring – because it’s too hard, demotivates people, encourages the wrong behaviour. The balance of the book is so critical of metrics that one could find oneself headed that direction. I do not believe this is the intent – and I do not think it the right conclusion. Rather we need to review again the strategic and operational objectives (in a more holistic way) and determine whether there are appropriate measures in respect of each of these. We need metrics which will motivate performance in line with organisation or corporate objectives.
