Don’t tie yourself up in KPIs

‘What gets measured gets done’ is reassuringly logical and familiar. Shame this truism isn’t always true. That’s because the inference of this call to arms is that what doesn’t get measured doesn’t get done. But for example, as Corporate Anthropologist Michael Henderson says, ‘you can’t measure culture’. He points out that the best your culture survey can achieve is people’s opinion of it.

Happily, there are myriad other more tangible measures where this aphorism does apply. But hold on again, because another inference here is that what gets done as a result of being measured is also desired. And that’s not always true either.

What’s the issue?

1. People are not machines, so only applying tangible measures to their inputs and outputs – as you would a machine – is missing the point of your human capital. You don’t measure the effect their presence has on others, or their creation of ideas. You don’t measure how they muck in to help others achieve their objectives, or how they live your values. But all these things massively impact on productivity. If you only measure people’s widgets of output, you’re missing a lot more than the point.
2. Measures have unintended consequences. Accident and Emergency (a.k.a. the ER) is targeted to see patients within x minutes of coming through the doors. So the A&E team refuses to let anyone through the doors until they’re ready. That means patients sit outside in ambulances which can’t attend other calls. This further reduces pressure on A&E and makes them look good, but increases waiting times. It’s a well-meaning measure corrupted by anxiety about the consequences of failing to meet targets, which becomes more of a worry than failing to treat patients.
3. Measures are designed to create focus. But having too many measures does the opposite. It creates confusion and anxiety. Balanced scorecards are usually only balanced in name. For example, 20% of revenue has to come from new products, which means increasing marketing spend. These are hard expensive yards to make on the pitch. It would be much easier just to milk the cash cows (which is why the measure exists). But another objective is to build cash reserves, which would tend towards cutting marketing spend (often the first to go). One needs to take priority over the other, but the ‘balanced’ scorecard scores them equally.
4. Measures are designed to gauge progress. But too many measures absorb valuable time measuring progress that would be better spent instead on actually making progress. For example. year-end reviews of 8 direct reports each with 17 objectives (yes, it happens) means that the leader has to spend valuable time at a critical time of year auditing and justifying metrics, when they need to be tying up loose ends and preparing to hit next year running.

Activities to consider

Think about your most important metrics: what problems are you trying to solve for your customers? What are your biggest threats and opportunities? What’s the single best way to describe stellar performance? What message are you sending by not measuring something? Etc.

Carefully think through their ramifications.

Have empathy, but not to be ‘nice’: imagine giving yourself that metric and then figure out how you could game the system to your advantage. Then keep refining the measure (or changing it altogether) until it’s reasonably incorruptible.

You can’t measure everything, so decide what you need to observe instead, and what is actionable even without quantified data. Culture can be described as the lowest level of behaviour the CEO is seen to tolerate. You can’t measure it, but you’d better keep your eye on it.

Try this

If you were to limit yourself to 3 metrics (apart from the statutory and standard financials) to measure the performance of your entire operation (company/function/team etc.), what would they be?

At 3, they’re highly unlikely to overlap or be confusing – indeed they’re more likely to unite than divide. They’ll be clear, aspirational, and talked about. And all those other things you’re nervous about that you’d have to stop measuring, what leadership behaviour do you need to step up to in order to motivate and govern performance?

At HPC, we developed Adaptability Based Leadership with the express purpose of raising productivity through more engaged, better led staff. If that approach resonates, contact me and let’s get you started on the next phase of your journey towards mastering leadership.