KPIs Don’t Improve Decision-Making In Most Organizations

The well-worn mantra, “if you can’t measure it, you can’t manage it,” might well be true, but Measuring and Managing Performance, a recent global survey of over 3000 organizations by the Advanced Performance Institute and Actuate uncovered shocking evidence that for many organizations measures aren’t actually helping to improve how they manage performance.

For starters, one-fifth of respondents said that they are getting very limited or no benefits from using performance measurement and performance management. This signals a huge level of waste, considering the time and efforts spent by people collecting, analyzing, reporting and reviewing performance data. But the survey found other, equally chilling findings.

As I continually stress in my writings and work with organizations, the primary purpose of using metrics is to improve decision making (otherwise, in an organizational setting, why measure anything).

At first glance, therefore, we some cheer about the finding that through the measures they use, most companies (61%) stated that senior management teams get insights into how well the company is performing.

But a deeper probe soon puts a stranglehold on that cheer. More than 70% of survey respondents say that managers do not get the insights required to improve strategic decision making and almost 60% of survey respondents reported that metrics do not provide the insights required by operational teams that help improve operational decision making. Less than one-fifth claimed that performance measures enable everyone to get insights that help improve decision-making at all levels. (See Figure 1 below).

Figure 1: Benefits realized from performance management

These findings support what I often observe in practice, where performance management activities are seen as “something you do for senior management,” so they can check on performance levels. In other words, measures are too often a means to control the performance of employees and not used as they should be – as powerful tools to empower people and improve performance.

In order to be truly valuable, everyone in the company needs to get benefits from performance measurement, analytics and performance management activities. It has to improve decision-making at all levels of the organization, from the executive team to the front line, for managing strategy and managing operations. This is simply not happening in most organizations, be they commercial, public or not-for-profit.

Given how poor organizations generally find performance measures to be in generating useful insights, it is unsurprising that Measuring and Managing Performance found that the overall satisfaction levels with the performance measurement and management activities was somewhat subdued.

While the majority of respondents say that in general people in their company are somewhat satisfied (42%) or mostly satisfied (19%) with their performance measurement and management activities, just two percent said that people were completely satisfied. Just over a third of respondents gave an unsatisfied rating with a further three percent were completely unsatisfied. (See Figure 2 below).

Figure 2: Performance management satisfaction rates

But not all survey respondents were either negative about their performance measurement and management approaches or qualified in their support. There were a select few who were very positive. And this raises an interesting question. Which companies generate the biggest benefits from performance measurement and management and what makes them different?

To answer this question we have analyzed our survey data using regression and correlation analyses to find out the key differences between those companies that reported low levels of satisfaction and only very limited benefits and those that reported high satisfaction levels and true business benefits of improved operational and strategic decision-making throughout the entire company. This analysis provided telling insights and allowed us to create a performance management maturity model, both of which I will describe in a subsequent blog.

In the meantime, please let me now your thoughts on performance metrics. Do you agree with my views? Please share your views, comments or ideas below.

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Here are some other related posts I have written:

• The Seven Secrets of Top Performers
• The Top 5 Performance Management Tools: Good News And Cautionary Tales
• What The Heck Is a... KPI?
• Caution: When KPIs Turn To Poison
• Big Data: The 5 Vs Everyone Most Know
• The 75 KPIs Every Manager Needs to Know
• What The Heck is a Balanced Scorecard?
• The One Thing Successful People Never Do!

About : Bernard Marr is a globally recognized expert in strategy, performance management, analytics, KPIs and big data. He helps companies manage, measure and improve performance.

Images: Shutterstock and Advanced Performance Institute