From my observations the failure rate for KPI and balance scorecard projects is off the scale. There are a number of contributing factors that have led to this failure rate.
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. To make matters worse, organisations are being led by poorly trained CEOs.
The reasons for this lack of CEO training stems back to the CEOs’ informative years. In the 90s there was a wholescale divestment in human resources on a grand scale. In the 80’s it was common to see large HR departments with their own training, recruitingand nurturing activities. Nothing regarding people could take place without HR involvement. Their sphere of influence was everywhere.
In order to become a supervisor, you had to attend a week-long course and, further up the tree, more financial investments were taking place. Executive team members were being sent to leading universities around the world to become indoctrinated in modern management thinking.
At General Electric, the management were exposed to the greatest thinkers alive, with Peter Drucker being a regular visitor to Crontonville, their own management training school. Jack Welch’s phenomenal performance at GE can be tied back to the training and mentoring he received. As a senior manager, he was required to deliver training to younger managers. A reverse training programme successfully used by modern thinking companies.
Nowadays, it is hard to find more than two executives in the same senior management team, who have had this level of investment in their training. In fact, is it possible to find two executives on the same team who have a cluster of mentors supporting them? Being in senior management, without mentors behind you, is like going tandem sky diving without the instructor strapped to your back.
One of the biggest casualties of this lack of ongoing education of the senior management team has been the failure of large performance management projects, such as KPI projects, to succeed.
Key Performance Indicators, in many organisations are dysfunctional and thus a broken tool. Measures are often a random collection, prepared with little expertise, thus signifying nothing. KPIs should be measures that link daily activities to the organisation’s critical success factors, thus supporting an alignment of effort within the organisation, in the intended direction. I call this alignment the El Dorado of management.