Are KPIs and Performance Measurement Now Outdated Fads?by clairedening |
Do big data, analytics and AI mean that performance measurement is just another outdated management fad, and KPIs will soon become irrelevant?
Some consider that Six Sigma is now an outdated management fad, even after GE invested heavily in training people in Six Sigma, with a lot of success over many years:
“By 2001, GE boasted that some 80,000 employees had received Six Sigma training (pdf), and completed 500,000 Six Sigma projects since the system was adopted. It seemed to produce results. In the five years to 2001, GE’s annual profit increased by 66%, to $13.6 billion.”
Management fads are methods or frameworks or ideas that rise to popularity quickly, and then descend into disfavour not too long afterwards. Management classics, on the other hand, might rarely make it into the headlines but they tend to stick around because they work.
How do we know if KPIs and performance measurement are just a management fad?
Fads are easier to distinguish from classics, based on a helpful set of characteristics published by Miller and Hartwick in HBR:
- Simple: acronyms and buzzwords, with limited practicality for the real world
- Prescriptive: directive actions that are easy to misinterpret or apply the wrong way
- Falsely encouraging: no objective way of verifying the success they promise to deliver
- One-size-fits-all: claim to be universally applicable but rarely are
- Easy to cut-and-paste: perceived to be partially implemented, thereby failing to make fundamental change
- In tune with the Zeitgeist: align with the few currently popular business problems, rather than to fundamental business performance
- Novel, not radical: repackaged sassier versions of existing management practices, without adding any missing bits or useful depth
- Legitimized by gurus and disciples: ride on the coat tails of famous leaders or business experts, rather than on their own merits
Armed with this list, we now have a framework to answer the question about whether KPIs and performance measurement are just another management fad.
Do KPIs and performance measurement satisfy the characteristics of a management fad?
We’ll define performance measurement as a process of deliberately selecting, implementing and using quantitative measures (often called KPIs) that align with organisational strategy and purpose. A method like PuMP. So, is proper performance measurement a fad? Let’s find out…
A comprehensive performance measurement approach, like PuMP, can be logical, practical and step-by-step, but it isn’t simple. It takes some hard thinking to measure the right things in the right ways.
Measurement approaches that advise trivial steps like brainstorming KPIs or searching a KPI library or giving thin frameworks (like SMART) are too simplistic, and likely are fads.
When your performance measurement approach guides you with techniques to design your own KPIs and metrics, it can’t be considered prescriptive. It should give you the structured thinking tools to tailor KPIs to your own situation.
Measurement approaches that give you a prescribed list of KPIs for your organisation, or off-the-shelf dashboards decorated with trendy (but entirely ineffective) dials and gauges are overly prescriptive, and likely to be fads.
Falsely encouraging: No.
A good performance measurement approach won’t promise increased profit or customer loyalty or employee engagement. The results of a good measurement approach are that you reach your goals sooner and with less effort, whatever the goals are you choose. But you have to implement the whole approach, and master it, to get those results.
Even though the amounts of data available is growing exponentially, beware of promises from ideas like big data. They promise that powerfully profitable insights will gush from your data. But they rarely mention the work you need to do first to make the data accessible and reliable enough, and to articulate the questions you want the insights to answer.
A proper approach to performance measurement will appear to fail this characteristic of one-size-fits-all. The truth is, a good measurement approach is to any goal like the scientific method is to any hypothesis. There is actually more danger in a tailored approach. One-size-fits-all builds rigour and proven techniques into the approach.
Beware of measurement fads that provide techniques that are not founded on well-tested and proven theory. Like how many dashboards assume insights come from point-to-point comparisons, when the proven theory is that insights come from understanding statistical variation.
Easy to cut-and-paste: No.
The thing about measurement being a process is that it has steps. No step is unnecessary, and each step creates the right inputs for the subsequent step. You can’t take one step out and do it in isolation, and expect great results.
Methods like the Balanced Scorecard have been cut-and-pasted so very often. People have cut the four perspectives and pasted them in their own way, and lost the research-informed theory of cause-effect that the framework was built from.
In tune with the Zeitgeist: No.
The topic of performance measurement has been around for decades. It got a little bit of prominence when the Balanced Scorecard was published in the 1990s, and when David Parmenter published his “Key Performance Indicators” book. But if you look over most management journals and media, it’s one of the least written-about topics. It rarely makes the headlines.
The measurement related ideas making headlines at this time are big data, analytics and AI. These are tools that give us greater access to information in our growing datasets. But they don’t do the thinking for us, and still need to be guided by signals in measures of what matters most.
Novel, not radical: No.
A good performance measurement approach, and particularly PuMP as an example, challenges the fundamental way something is done. It’s not a repackaged version of the same old common KPI practices. It’s a thorough process of techniques that challenge and reengineer the way people create measures, to remove the common struggles.
A few twists on performance measurement have emerged over the years. OKRs, North Star Metrics, OGSM, and even the term ‘KPIs’ have all grabbed some spotlight with their catchy names and simple concepts. But they have traded depth for novelty.
Legitimized by gurus and disciples: No.
Who created the scientific method? Who created strategic planning? Who created PuMP? Who cares. What matters more for a measurement methodology is that it works, and its popularity and adoption grows for that reason alone.
Gurus certainly have helped various measurement tools rise to global fame. Like Andy Grove and OKRs, Kaplan and Norton and the Balanced Scorecard, and Jack Welch and Six Sigma. But none of these approaches address the real struggles people have with developing KPIs.
The right approach to performance measurement can never be a management fad.
The KPI term might be a fad, but the underlying measurement process isn’t. True performance measurement has almost none of the characteristics of a management fad. And a really good approach to performance measurement can easily become a management classic.
Do big data, analytics and AI mean that performance measurement is just another management fad, and KPIs will soon become irrelevant?
Dispensing with performance measurement and KPIs while relying solely on big data and AI follows the same logic as ignoring basic altitude, airspeed, and heading when flying an aircraft equipped with automated flight controls. Best to cross check and arrive alive.
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