What is the answer to the ultimate question of life, the universe, and everything? When we have the answer - 42 - we realise this is not taking us very far. We formulated the question in such a general manner, that even with the answer at hand, we can't really say we feel more informed about life, the universe and everything. The same goes for ill-chosen Key Performance Indicators.
Employees should know what is measured, how it is measured and most importantly why it is measured. Ideally they participate in the decision process that culminates in the definition of the KPI's. They know best how they do their jobs and in a lot of cases also know what is needed to do the job better and reach better results: better customer satisfaction, better service, more turnover. Once they know what is going to be measured, they try to maximise the results of these measurements. This is how you reach a certain strategic goal: decide where you want to go, look for a way to measure whether you are going in the right direction and share the results and evolution of these measurments with the people who do the task.
For instance, when you want to avoid long queues in the supermarket you can measure how many products are scanned per minute by the cashier. The cashiers know they are accountable for keeping the speed up, and the rows down. But. The number of items scanned is not the only factor in this process. Also the customer putting his or her stuff in their bags takes time. So if you're measuring this the wrong way, the customer could feel preassured to hurry up, to get out of the way. The cashier maximising the results for this measurement can maybe reduce the scanning time, but driving the customers out on the parkinglot feeling stressed and pushed out.
Another example I witnessed in an organisation shows that you have to be carefull how to introduce a new report. In the report I am thinking about, the headcount and FTE in a certain department were listed. To the question how management was going to interpret the figures, what conclusions were going to be made the startling answer came: none. Then why introduce the report in the first place, moveover, no one believed this answer, suspicion was raised and figures manipulated to make the report look good. A perfect waste of time.
Can you think of interesting failures in the way KPI's are defined or reports are introduced. Let me know!