When business goals backfire: How to adjust to unintended consequences | Big Think

TL;DR

Organizations should ask themselves important questions about what is most valuable, how to measure it, and when KPIs are means or ends.

Transcript

There are several questions, essential questions that leaders and managers should ask themselves when they look at how they want KPIs to have an impact and influence on their organizations. The most important one is obvious: What’s most important to the organization? Where is value really created? Where is value really created for us internally and... Read More

Key Insights

• 😷 Organizations should ask critical questions about value creation and measure performance accordingly.
• ❤️‍🩹 KPIs can serve as means to achieve excellence or ends tied to specific outcomes, like profit or sales.
• 🧑‍💼 Balancing conflicting KPIs and managing trade-offs is a leadership challenge.
• 🥺 Using the wrong dominant KPI can lead to counterproductive behaviors and negative outcomes.
• 🍠 Triangulating different KPIs can help find a sweet spot that satisfies multiple goals.
• ❓ KPIs should be recognized and rewarded appropriately to avoid incentivizing perverse behaviors.
• 😒 Stories exist of positive transformations driven by effective use of KPIs and negative examples of pathological KPIs.

Questions & Answers

Q: What are the essential questions organizations should ask regarding KPIs?

Organizations should determine what is most important and where value is created, as well as how to measure performance and link it to outcomes. They should also consider when KPIs are means or ends.

Q: What is the challenge in determining when KPIs are means or ends?

The challenge is recognizing when excellence is the goal and the KPI is the means to achieve it, or when the outcome, such as profit or sales, is the priority. Balancing these two types of KPIs is crucial.

Q: How can KPIs create tensions and conflicts?

KPIs can create tensions when achieving one KPI, such as increased sales, negatively impacts another, like customer satisfaction. Managing these trade-offs is a challenge for leaders and managers.

Q: Can using the wrong dominant KPI lead to negative outcomes?

Yes, using the wrong dominant KPI can incentivize perverse behaviors and lead to negative outcomes. For example, focusing solely on reducing call time in call centers resulted in unhappy customers and a bad user experience.

Summary & Key Takeaways

• The most important question for organizations is determining what is most important and where value is created internally and for clients.

• Organizations must consider how to measure performance that leads to desired outcomes.

• Knowing when KPIs are means or ends is a challenge, as sometimes excellence is the goal, while other times outcomes like profit or sales matter most.