Why should you measure KPI's?

Business School Associate Professor Stephen Willson looks at how the measurement of KPIs impacts a business, for better and for worse.

What Get Measured 1200x450 - Man holding an iPad with data

"What gets measured, gets done", so says the maxim. However there are some important layers here that are worth exploring.

A busy multi-faceted public sector service applied 55 KPIs to cover all the bases. The upshot was lack of prioritisation and managerial despair (they’ll get me on something).

Management by exception infers fine-grained measurements. But when the output of one unit is the input of another the resulting behaviours are often divisive. Both sides fight their own corner leading to failure to find delicate compromises that lead to the best overall outcome.

When the pressure to produce targeted figures is high (year end?) there may be an irresistible temptation to take short term measures that are damaging in the long term. It may even lead to making up the numbers as witnessed by a number of recent corporate failures.

What gets measured gets manipulated!

Yet we must measure for reasons of efficiency. Every increment of resources used must lead to the maximum useful output. Waste in all forms must be minimised.

In essence then our drive for efficiency must not be at the expense of behaviours that reduce effectiveness and contravene organisational values. Which leads to the question of how can we measure behaviours?

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In the recent podcast interview for the series The Middle, David Thompson, chief constable of West Midlands Police, raised this interesting point.

Front-line policing is action-driven, exciting and adrenaline-packed. Career advancement though requires the parallel development of a more reflective, system-focused approach. How an officer drives their car turns out to be a powerful indicator of their stance.

A further issue is surfaced in Anna Slocombe’s interview that reflects on the different time frames over which measurements are actioned between publicly owned and privately held organisations.

Measure we must but let’s always be mindful of adverse consequences and challenge ourselves to complement efficiency measures with those focusing on encouraging the appropriate behaviours that will lead to overall long-term growth.

Associate Professor, Birmingham City Business School

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