Key Performance Indicators (KPIs) drive much of what we do. They can be powerful tools when properly understood – but potentially detrimental when not. As the saying goes, “when all you have in your toolbox is a hammer, every situation looks like a nail.”
F. John Reh defines KPIs as “indicators that are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization.” Measurement is the key as Reh points out – “in order for an indicator to be of any value, there must be a way to accurately define and measure it.”
Clearly understanding your KPIs is only the beginning, as Bernard Marr points out in this article entitled Caution: When KPIs Turned to Poison. According to Marr, KPIs are not goals or targets, but something to me measured. They should reflect the goals of the organization – not be defined as the goal. Use caution when designating KPIs. As Marr states, “One reason why things go wrong with KPIs is that they sometimes turn from a measure into a target. I believe that when a KPI becomes a target it stops being a KPI.”
He describes each KPI as a torch in a dark room, illuminating one small area of the space. Because only one area is affected, several KPIs are needed to bring light to the entire room. Marr says, “If we now use this imperfect measure as a target it means people can deliver great results on the spot that is lit up, but ignore the large areas that are left in the dark.”
In closing, Marr says “KPIs are powerful tools if they are used as indicators to measure the delivery of the goals. However, if the KPIs become the goals, then they turn into toxic material that will inhibit performance improvement.”
Let us help you develop and implement a non-toxic set of KPIs that reflect your organization’s critical success factors and illuminate the entire room.