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>
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<p><em>“When a </em><strong><em>measure becomes a target</em></strong><em>, it </em><strong><em>ceases</em></strong><em> to be a good measure.”</em></p>
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<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 <strong>dangerous tunnel vision</strong>. Employees, in their quest to improve KPIs, <strong>might lose sight of the bigger picture</strong> — improving overall performance. In theory, improving KPIs should go hand-in-hand with improving performance. In practice, however, there’s always a way to “<strong>game</strong>” 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 <strong>myopic</strong> focus on <strong>superficial</strong> numerical improvement, often at the expense of actual performance improvement. This phenomenon is especially pronounced in complex <strong>second-order systems </strong>— systems that change their behavior based on feedback about themselves. Human-centric systems typically fall under this category.</p>
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