by David Parmenter
I have been working with performance measures for over 20 years, and in that time I have witnessed minimal progress in the right direction. 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.
However, I firmly believe that performance measures exist for a higher purpose; helping align the staff’s daily actions to the organization’s critical success factors”.
Yet, in reality, measures are often a random collection prepared with little expertise signifying nothing. For this reason measures that contain these problems should be abandoned:
- Measures gamed to the detriment of the organization so that executives can increase their pay.
- Teams encouraged to perform tasks that are contrary to the organization’s strategic direction.
- Costly “measurement and reporting” regimes that locks up valuable staff and management time.
- Measures derived by consultants rather than by inhouse by an inhouse KPI project
A RADICAL TREATMENT FOR A RADICAL PROBLEM
Why would an author who has made a living from preaching about implementing winning KPIs now have a change of heart? The answer lies in his witnessing the failure of many performance measurement initiatives.
After twenty years of presenting and writing to advocate the proper use of performance measures I am now convinced, that in many cases, a more radical approach is necessary.
The medical profession, for centuries, has realized that in acute cases extreme action is required. Some treatments for critically ill patients involve the eradication of the immune system, and then slowly, step-by-step reintroducing it. An abandonment, albeit on a short term basis, of all performance measures may well be the radical treatment required before we can cure the patient (the organization).
Maybe we need to cut the rot out otherwise it will eventually destroy all new performance measurement initiatives. Starting again, after abandoning all measures, will enable organizations to rebuild the way performance measures are used from the ground up.
PERFORMANCE MEASUREMENT SYSTEMS ARE BROKEN
Performance measurement systems are broken and the reason for this is very simple. Organizations, in both the private and public sectors, are being run by management who have not yet received any formal education on performance measurement. Unlike accounting, and information systems where rigorous processes have been formulated, discussed and taught, performance measurement has been left as an orphan of business theory and practice.
Whilst writers such as Edwards Deming[i], Whetley and Kellner-Rogers[ii], Gary Hamel[iii], Jeremy Hope[iv] and Dean Spitzer[v] have for sometime illustrated the dysfunctional nature of performance measurement their valued arguments have not yet been reflected in business practice.
There is a long journey ahead in order to get performance measurement functioning properly. We will be well on our way to this goal when students are attending lectures on measurement and professionals are being examined on their understanding of performance measurement in order to obtain their desired professional qualification.
This information has been extracted from David Parmenter’s Key Performance Indicators (4th Edition) which is the highest rated KPI book on Amazon.
You may like to visit:
- his KPI home page
- his KPI toolkit (whitepaper + e-templates) for (<100 FTEs, 100-250 FTEs, 0ver 250 FTEs)
- his KPI book page
- his KPI database
- his KPI book e-templates
[i] W. Edwards Deming “Out of the Crisis” The MIT Press, 2000.
[ii] Whetley and Kellner-Rogers “What Do we measure and Why” , (Journal for Strategic performance Measurement,June 1999).
[iii] Gary Hamel and Bill Breen “The Future of Management”, (Harvard Business Press, 2007).
[iv] Jeremy Hope “Reinventing the CFO: How Financial Managers Can Transform Their Roles and Add Greater Value”, (Harvard Business School Press, 2006)
[v] Dean Spitzer, “Transforming Performance Measurement: Rethinking the Way We Measure and Drive Organizational Success” (New York: AMACOM, 2007).