Risk Management

3 Cardinal Sins of KPIs and Performance Metrics

Regardless of the size of your business, key performance indicators (KPIs) improve business. It is just up to you to make them work. Bernard Marr writes an article about the three things not to do with your KPIs:

  1. Measuring everything that walks and moves
  2. Not choosing the relevant KPIs
  3. Collecting the same KPIs as everyone else

KPI Killers

Is it safer to measure too much than too little? Probably. But trying to measure every conceivable metric of value is like turning on every light in your house at night, even though you are just sitting in the living room. It wastes energy and money for no good reason. Worst of all, it quickly leads people to the false conclusion that building metrics is a fool’s errand, because they do not realize they were approaching the endeavor incorrectly. Instead of thinking about what can be measured, just decide what things you really need to know, and then build metrics that answer those fundamental questions.

But even when you think you have picked the metrics that answer your questions, you could still be wrong. Marr himself has compiled a list of 75 potential KPIs, and it can be tempting to just pick out a few of the really basic ones and call them your KPIs. But that of course will get you nowhere in the end. Think about what processes define success for your business, and then determine which KPIs will most accurately measure those processes.

Lastly, one more thing that will obviously not work is taking a “go with the crowd” approach to KPI selection. Marr explains:

So a business leader may decide that KPIs are something he really needs to take seriously but[,] rather than work out what information he needs and what critical business questions he needs the data to answer[,] he will look at competitor businesses or discuss KPIs with other senior executives inside or outside the business and gather a list of KPIs that everyone else is measuring.

This can also happen if a particular KPI or metric gains popularity in leadership journals. Just because everyone is talking about customer satisfactions surveys or employee engagement surveys doesn’t automatically mean you need those KPIs. Whether you invest in these types of measure will depend on your strategy and nothing else.

KPIs will definitely lead you to one of two places—to greater heights of success, or straight off a cliff. The destination is up to you. You can read the original article here: http://www.tarnews.co.za/the-3-cardinal-sins-of-kpis-and-performance-metrics/

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