The 3 cardinal sins of KPIs

Key Performance Indicators (KPIs) are incredibly powerful tools in modern business and most people have heard about them, which means that many businesses have sought to implement KPIs in some form or another. As a result, there is a danger that you could dismiss KPIs thinking, “Oh I’ve tried KPIs they don’t work in my business” or “are not relevant in my business”.

KPIs do work and they are relevant in every business from small family run organisations to global multi-nationals. If you’ve tried to use them or you know someone who’s tried to use them and they didn’t yield their promise then my guess is you or your acquaintance committed one or more of the three cardinal sins of KPIs…

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

Measuring everything that walks and moves

One of the biggest errors people make when seeking to implement KPIs is that they decide to measure everything that walks and moves. They ferret out every single metric, data point or information hot spot.

The assumption is that lots of information is better than no information but actually it’s not. Too much information is as useless as too little so seeking to squeeze every drop of data from every corner of the business without any regard for what you actually need and how you will actually use the vast amount of data you plan to collect is just as damaging as doing nothing.

In fact you could argue it’s more damaging because you are wasting time and money collecting data you will never use which is not only pointless but very frustrating to the people who do the collecting! Going from nothing to everything is remarkably common but it never works. Instead it leads to overwhelm and within a matter of months towels are being thrown in all over the business as executives mutter, “see I told you it wouldn’t work” or, “See we tried that before and it was a nightmare then too.”

Forget what you can measure figure out what questions you need answered in order to deliver your strategy and only implement KPIs that will answer those questions.

Collecting the same measures as everyone else

The other big error people make is working out what KPIs to measure by looking at what everyone else is measuring. 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.

Obviously there are some KPIs that most businesses will measure – especially around the financials of the business but outside those stalwarts consider your business needs only not popularity. Besides you may not even know what your competitors strategy is so copying those KPIs will usually be a waste of time.

Not choosing the relevant KPIs

The final clanger people make when implementing KPIs is they don’t choose the right ones. There are loads of KPIs to choose from. In my book Key performance Indicators I list 75 but there are many more than that. Needless to say, many business people are already completely overwhelmed by KPIs, how many there are and whether or not they should be measuring them!

If you also consider that the amount and type of data we have access to is constantly increasing and therefore the amount and type of KPIs will also increase then it’s easy to see why people panic and just grab the easy, obvious or common KPIs. At least that way they can say, “KPIs – yeah sure I have some of them!”

It really doesn’t need to be that hard. KPIs are only useful if they are meaningful and deliver mission critical information. It follows therefore that once you know what you are trying to achieve that target should drive the KPI selection process and nothing else.

This article is published in collaboration with LinkedIn. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Bernard Marr is a best-selling author, keynote speaker and leading business and data expert.