The Paradox of Performance Measurements: A Double-Edged Sword

<p>As businesses strive to improve efficiency and profitability, they turn to key performance indicators (KPIs) as a way to measure their progress. Nevertheless, as with any tool, the improper application of KPIs can result in unanticipated and often detrimental outcomes. They may become a stumbling block rather than a conduit for improvement, an uncontrollable monster that distorts the whole nature of performance monitoring. As the economist Charles Goodhart, stated:</p> <blockquote> <p><em>&ldquo;When a&nbsp;</em><strong><em>measure becomes a target</em></strong><em>, it&nbsp;</em><strong><em>ceases</em></strong><em>&nbsp;to be a good measure.&rdquo;</em></p> </blockquote> <p>This statement underscores the paradox of performance measurement. KPIs are invaluable for monitoring the pulse of a business, but if they become the sole focus, they can lead to a&nbsp;<strong>dangerous tunnel vision</strong>. Employees, in their quest to improve KPIs,&nbsp;<strong>might lose sight of the bigger picture</strong>&nbsp;&mdash; improving overall performance. In theory, improving KPIs should go hand-in-hand with improving performance. In practice, however, there&rsquo;s always a way to &ldquo;<strong>game</strong>&rdquo; the system.</p> <h1>The Art of M<strong>ismeasurement</strong></h1> <p>KPIs are valuable for tracking progress, but pinning everything on them can lead to a&nbsp;<strong>myopic</strong>&nbsp;focus on&nbsp;<strong>superficial</strong>&nbsp;numerical improvement, often at the expense of actual performance improvement. This phenomenon is especially pronounced in complex&nbsp;<strong>second-order systems&nbsp;</strong>&mdash; systems that change their behavior based on feedback about themselves. Human-centric systems typically fall under this category.</p> <p><a href="https://medium.com/@dfayez/the-paradox-of-performance-measurements-a-double-edged-sword-14f52021385b"><strong>Learn More</strong></a></p>