Most people nod vigorously and agree that KPIs and measures are a "good thing". Used sensibly they are, but many organisations are actively undermining their process improvement through the poor use of measures.
Here are some of the most common pitfalls and some ideas on how to tackle them.
1. KPIs that show you only part of the picture.
Even if your measures and KPIs are set up properly, you may be missing a big part of the picture giving a false sense of security - as they may not comprehensively cover the things you really care about. Some of the biggest process improvement opportunities come in the form of things that organisation may not even be aware are problematic. To find this type of opportunity you need a structured approach to mapping out the key drivers on the outcomes you are looking at (I use my Success Mapping approach, you could also use a modified version of TPM PM Analysis or derivative of the BSC approach)
2. KPIs that are WRONG
KPIs and measures can be wrong in a number of ways (and often several ways all at once!). They can be incorrectly defined (I've seen countless organisations define OEE incorrectly), there can be variable definitions within the same organisation, there can be spreadsheet arithmetic errors, and there can also be wide variations in the understanding of what those measures are showing.
The solution is simple, although it can be demanding: create a KPI database. This can be pretty simple (link to the checklist on my site: http://www.madetomeasurekpis.com/2011/post/tools_to_help/kpi-definition-checklist/) but it is key that there's one clear definition of each measure, with the issues and inaccuracies also recorded and maintained.
3. KPIs that drive the wrong employee behaviour
We have all been rushed off the phone by a call centre employee who is measured on AHT (average handling time) rather than something more meaningful (like total time to problem resolution). People generally behave rationally, it's often the measures that make then do odd things. One way to avoid this is to simply ask your team "What do you find yourself doing to make the numbers that doesn't feel right to you?".
4. KPIs that are out of date
There's an old joke about being able to produce a perfectly accurate 7 day weather forecast, only it takes 14 days to create. Often the analysis produced in organisations is too old to be enable effective decisions. This leads to one of two choices: stop producing the analysis or improve the KPI production process.
5. Sucking up valuable operational resource to produce them
I've worked with teams of 40 or 50, all dedicated to creating reports and dashboards. Some of the work will always require a human, but most won't. The first port of call should be looking to automate much of the tedious Excel legwork that seems to happen in most corporations. Next look at quick-to-implement BI tools like Qlickview and Tableau (there are a couple of first-look reviews http://www.madetomeasurekpis.com/2011/post/first-look-qlickview-10-data-visualisation-software/ and http://www.madetomeasurekpis.com/2011/post/review/first-look-tableau-6-1-data-visualisation-software/). In the long term a consolidated data warehouse can yield benefits, but has a high capital cost and can introduce as many problems as it solves.
6. KPIs as a management club to beat staff up
We've all seen it, measures being used as a club by aggressive managers. There really isn't a KPI fix here, it's all about addressing those behavioural issues with the managers and making it clear that KPIs are not an instrument of torture. But be certain that if you don't address this issue it will shatter peoples enthusiasm for measurement (and management).
7. Drowning process managers in detail - making sensible decisions impossible
Most humans can hold between 4 and 7 "chunks" of data in their mind at once, so how do they cope with 95 page "Risk and Compliance" reports. Put simply, they don't. In this situation they skim through, looking for exceptions and at their "pet" measures. Dashboard and report design is a big area, but this link http://www.madetomeasurekpis.com/2011/post/howto/how-to-build-a-brilliant-dashboard/ gives a few starting tips.
KPIs can be a great force for good, but if you fall into one, or more, of these traps you can miss out on much of the value they can deliver. For more practical advice on tackling some of these problems visit Bernie's site at www.madetomeasurekpis.com
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