Why KPIs are bad for you

key-performance-indicator

Great job on your Sales KPI, we hit target this month and did better than last month, keep up the good work.  We have a problem with the customer service KPI though, we need more focus here.  James, your area is doing well so whatever you’re doing; keep it up; everyone else needs to try harder. Thanks everyone… now let’s make today a great one.”

If that sounds like a team meeting or briefing you’ve ever been in then you may share my love / hate relationship with KPIs.

Most businesses use them and my view is that whilst businesses need goals and aspirations, KPIs tend to drive the wrong behaviours.

What I mean is that employees will do whatever is required to hit their KPIs, even if this has an overall negative impact on the business or unintended consequences.  It may sound far-fetched but is very common.

I did some work recently with a company to uncover why their KPIs showed 99% on time delivery but they received many customer complaints regarding late deliveries.  What I discovered was that the delivery team were targeted on ‘on time deliveries’, but the measure only applied to orders actually delivered (in other words it did not take account of cancelled orders).  Team leaders were routinely cancelling orders that they could not make on time thus hitting their KPI but leaving customers without their orders and the business with high levels of lost sales (that it did not or could not measure).

A telephone call to your GP will also generally highlight a similar problem.  GP surgeries are targeted on ensuring that same-day appointments are available.  Great, unless you want to book a next day appointment or object to waiting in a telephone queue at 8am.

Many sales reps are targeted on calls / visits per day – does this really deliver the best result for growing sales and improving customer service?

Managing people via KPIs leads to

  • fudged figures so an inaccurate or narrow view of true performance
  • colleagues competing rather than collaborating for fear of being the one to miss a  personal target
  • focus on doing tasks more productively even if the tasks serve no purpose
  • focus on easy to count widgets rather than measuring meaningful results

So if KPIs aren’t the answer, how can businesses improve performance?

Business cannot be condensed into a few graphs.  Business is holistic – in changing one variable you invariably affect others.  To make a business work you need staff who understand their role, think for themselves, make informed decisions and have the skills and training they need to do their jobs. It is behaviours not KPIs that drive performance. In order to discard the comfort blanket of KPIs, Business Leaders need to adopt an alternative model which;

  • Shows results across the business

Make sure that goals set are at the right level.  A narrow focus will probably deliver short-term results in that narrow focus, but may have unintended consequences and not lead to long term improvement.  Consider a balance of measures which truly indicate business success.  What are the behaviours that drive success in your business?

  • Provides knowledge of how to improve processes

For instance, going back to the team meeting at the beginning of this blog – the team members understand the KPIs but have no clue as to how to improve them.

How DO they improve customer service?

The only way to build sustained results is to improve the underlying behaviours. Don’t ask a team to improve customer service, ask them to return calls promptly, acknowledge orders, check order progress or whatever good customer service looks like in your business.

  • Motivates and involve people

Focus on behaviours, co-operation and creativity.  Ensure that the team have a key role in defining the right behaviours and the freedom to do a good job.

It takes confidence and a little thought to abandon KPIs as a performance management tool, but time invested in understanding the behaviours that drive success in your business and involving the team in the process will deliver rich rewards.

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One thought on “Why KPIs are bad for you

  1. Pingback: Around The Rink » Blog Archive » The Brockville Braves, MBO , KPI – NFG

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