Why Leaders are Scared of KPIs

August 9, 2016 by Stacey Barr

The most visible leader in almost any country is the country’s political leader. We want such leaders to make a real difference, a positive difference, to the quality of life we enjoy in our country. But what do those leaders care about? How would they measure their impact? Can we figure out Why Leaders are Scared of KPIs? Here’s one response from such a leader.

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In Australia, Prime Minister Malcolm Turnbull was interviewed by Leigh Sales of the 7:30 Report program, following his re-election for another term. She was attempting to nail down some of the results that the Prime Minister’s government would achieve over this upcoming term.

Sales: “You mentioned those KPIs, as you put it, that you set for yourself. What are the other ones, and what should the public judge you against?”

Turnbull: “Well the public should judge us against the delivery of the commitments that we have made. And in particular, where I’m very focused as you know, on the big investment decisions and plans that we have. We have our commitment to Western Sydney Airport, for example. Our commitment above all, in terms of dollars, to the Defence Industry Investment Plan…” [He continued to elaborate a little on this project.]

Sales: “And to measure if you’re delivering on that… should it be measured purely against the figures on job creation and unemployment and the figures on economic growth?”

Turnbull: “Well Leigh, it will be measured against many different criteria, but the fundamental measurement, of course, is are the projects underway, are they being delivered, are they being delivered on-budget.”

Leigh Sales was asking the leader of Australia’s government about the results or impact the public could expect from his term in government. And his response was that his term in government will be successful if they implement projects as promised. This is a rather typical response from many political leaders about how they define success: that promises (which means projects) will be implemented.

We want impact, they measure activity.

The results we want from our government aren’t that they invest taxpayers’ money on projects. It’s that through this investment in these projects our way of life is better. But to measure how much better specific aspects of our way of life is risky in a political environment. Anything less than a perfect result is attacked by the opposition and attacked by vocal community groups, and these attacks distract, slow down and sabotage the progress altogether.

The broad, complex and intangible results that make up a better way of life are never completely within the control of any one person or any one group or political party, and so perfect results are near impossible. What is far more within the control of any one person or any one group, and therefore subject to less attack, is the action they take (and money they spend on those actions).

But they say they want to measure impact…

Ironically, Australia’s commonwealth agencies are supposed to meet the Public Governance, Performance and Accountability (PGPA) Act, which calls for them to meaningfully measure the outcomes of their agencies and thereby demonstrate the return that they create on taxpayers’ money. And this is a struggle for so many of those agencies, with so few of them publishing any well-designed measures of impact or return on investment, and so many of them continuing to focus on action-level indicators as evidence of success.

It’s our fault: we don’t tolerate failure.

The dynamic is that transparency about results and impact exposes leaders to scrutiny and attack when those results are less than perfect, and again, this attack gets in their way of making progress. So it’s safer for leaders to use action measures as evidence of success. It’s safer, but it’s not useful because it shuts down our ability to learn whether our chosen actions are working or not, and how we can improve the return on investment our strategies are trying to create. It’s a huge challenge in the public sector world-wide, but the private and non-profit sectors are not immune to this either.

Being an evidence-based leader is a double-edged sword.

Evidence becomes both a tool in our hand and a rod for our back. It is how we learn about the true performance of our organisation, so we can manage it, and how others might judge us for that performance. This culture has to change, or our organisations will continue to stifle learning, and will fail to speed up the closing of performance gaps. The price for informed decision-making is transparency and accountability. And while ever we judge our leaders for less than perfect organisational performance, that’s a price that will be too high for many leaders.

DISCUSSION:

What can we do to make it easier (less risky) for our organisational leaders to measure the true impact of their organisation’s strategy? How can we make it safe for leaders to learn?

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  1. Tom G says:

    Hi, another good question that has PLAGUED me for many years. with all of the information (including this blog) about how to manage a system, why do we cling to old ways and refuse to learn. just as you demonstrated, it is not safe for a leader to fail it is typically not safe for a SUBORDINATE to teach, a subordinate must inspire. demonstrating good results accomplished in a different way than expected will earn influence which is the only way to not activate the autoimmune system of an organization. if a true leader sees that you are working in their best interest, OPPORTUNITIES will come to affect change and instill correct principles.

  2. munyaradzi says:

    measuring activities rather than results and impact is unfortunately also a common feature in corporate culture: managers a measured and rewarded for being busy and talking in convincing language in meetings and in reports. stacy’s work will be a major breakthrough not only for public but private for-profit institutions.

  3. Prahlad Bhugra says:

    Hi Stacey,
    For a country at top level indicators like GDP, inflation rate, Balance of payment, interest rate, trade deficit vs budget deficit etc are good lagging indicators to see if the country is progressing or not.
    Similarly in a company profitability, sales increase YoY, return on capital employed etc are also good lagging indicators to see yearly progress.
    identifying leading indicators is not uniform across. some people measure activities and some people measure impact. I feel the KPI experts should attempt to standardize leading indicators too similar to lagging indicators by providing some case studies etc.

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