5 Reasons why businesses end up with poor KPI’s

September 14, 2009 · Filed Under Key Performance Indicators · Comment 

Unfortunately performance measures or KPI’s can get a bad impression because the prevalence of some terrible KPI’s in many businesses. The phrase “what you can measure you can manage” which came originally out of a McKinsey strategy has been belittled by many. I am not saying that you can measure everything (that is for another post). The failure of KPI’s and perception that has been generated I believe has come about from poor implementation of performance measurement.

The reasons that business have poor KPI’s include:-

  1. They do not exactly know what is success in the eye of the customer.  We must start with the customer to know what we should be focusing on measuring and tracking.
  2. Lack of a complete understanding of the operational drivers of the business success.
  3. Having KPI’s that are at odds with each other. For instance if there is a KPI on customer value delivered and then a KPI on employee productivity then there can be a tension as to which one is the most important.
  4. Too many KPI’s. Some businesses I have encountered have had more than 50 KPI’s at senior management level. This just means that none of them will be focused on.
  5. The design of the KPI has been delegated a low level person in the finance department. The KPI’s are too important not to designed by CFO or senior management.

I am sure that there are many other reasons why inappropriate performance measures end up being designed and implemented however these are five I have seen to0 often.

Your thoughts please.

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