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KPIs: time to abandon ship?

In his second article on performance management, David Parmenter asks whether its time to leave key performance indicators behind and adopt more radical measurements.

Key Performance Indicators (KPIs) in many organisations are a broken tool. Measures are often a random collection prepared with little expertise, signifying nothing. KPIs should be measures that link daily activities to the organisation’s critical success factors (CSFs), thus supporting an alignment of effort within the organisation, in the intended direction. I call this alignment the El Dorado of management.

However, poorly-defined KPIs cost the organisation dearly. Some examples are: measures gamed to the benefit of executive pay which leads to the detriment of the organisation; teams encouraged to perform tasks that are contrary to the organisation’s strategic direction; costly “measurement and reporting” regimes that lock up valuable staff and management time; and a six-figure consultancy assignment resulting in a “door stop” report or balanced scorecard that doesn’t function well.

In the July/August issue of Finance and Management I highlighted the myths that influence our thinking on KPIs. In this article I will talk about a radical treatment to fix KPIs that has a good chance of success.

A radical treatment for an acute problem

Why would an author who has made a living from preaching about implementing winning KPIs now have a change of heart? It is because I have witnessed the failure of too many performance measurement initiatives. I am now convinced that in many cases, a more radical approach is necessary.

This is an extract from the Finance & Management Magazine, Issue 213, September 2013.

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Full article only available to ICAEW members and students.