A visitor to our site recently sent us a message about the use and integrity of KPIs:
“Why does my company focus so strongly on metrics (KPIs)? They’re meaningless, and our performance as an employee is evaluated by these metrics. Management finds a number that goes up, and we all have to stumble around making our number go up (even though six other number are going down). Then, like a dog with a bone, there’s another new number to focus on. Rinse and repeat. Everything is driven by bogus metrics from people who have no connection whatsoever with the sales floor.”
SKSP’s Take:
Intelligent leaders need to accept that the metrics they choose, and the information systems they create, will cause real world outcomes that specifically serve that metric. If they choose a poor, one dimensional metric (for example: credit card applications) and focus solely on that, leadership may get unintended results which such as falsified applications. Additionally, a fixation on credit applications may lead sales reps to focus less on sales and more on sign-ups. Instead of stocking shelves, lower-level management might pull stockroom associates to the salesfloor for sign-ups. And the list goes on.
Smart business leaders must understand the myriad ways that numbers can mislead. Employees who can aggregate analytical data and interpret it, in light of understanding what it can and cannot do, are the people that design these systems. When that system is also used by other analytically-minded people with an understanding of how these metrics work, an overall benefit to the organization is netted.
That said (and we’re speaking from more experience than we’d care to admit), there are many organizations in which these characteristics are overlooked when promoting middle-management. It’s because these positions often require a different personality type. Many employees who become store and regional mangers for box store chains, don’t really think statistically. They see numbers more simply. Up equals good and down equals bad. They see and treat these metrics as gospel, not as the tool they’re intended to be.
In organizations we’ve advised, we find fault ultimately lies with the senior leaders. Simply put, they fail to recognize that when designing metrics, the front-line manager is going to use them exactly as described above—that is as a one-dimensional detail. You can’t design metrics as though business analysts will be the ones using them, they have to be designed for lower-level representatives and their managers. The software doesn’t have to make sense just to the programmers who understand how the data actually works, but to end-users that often still see computers as some kind of magic box, and thus overestimate what the data can do.
As always, the human element is maybe the most important metric.