Abolishing the myths
Myths surrounding performance management are limiting the effectiveness of key performance indicators in business says David Parmenter, who sets out the facts.
I have been working with businesses to improve performance measures for over 20 years, and in that time I have seen minimal encouraging progress.
For many businesses, deriving measures is often viewed as an afterthought; they are regarded as something we fill into a box to say we have achieved a goal.
But key performance indicators (KPIs) exist for a higher purpose: helping align the staff’s daily actions to the organisation’s critical success factors (CSFs). Here, I address the myths that influence our thinking about performance measurement and, of course, KPIs in our organisation. In a subsequent article I will talk about a radical treatment to cure KPIs.
In order to get KPIs to work, we need to challenge the myths they have been built upon. Consider these five myths of performance measurement:
- Most measures lead to better performance.
- All measures can work successfully in any organisation, at any time.
- All performance measures are KPIs.
- By tying KPIs to pay you will increase performance.
- There is a need to set annual targets.
Measurement initiatives are often cobbled together without the knowledge of the organisation’s critical success factors and without an understanding of its behavioural consequences. It is a myth of performance measurement that most measures lead to better performance.
Every performance measure can have a dark side, a negative consequence, an unintended action that leads to inferior performance.
This is an abstract from an article which first appeared in Finance & Management Faculty magazine issue 212 July/August 2013.
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