KPIs are a terrible substitute for good leadership
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When a measurement becomes a target, it ceases to be a good measure. This is sometimes called Goodhart’s Law.
Most companies have goal setting and progress measurement systems. Often called Key Performance Indicators or KPIs. It’s a noble endeavor but we should be extremely careful when measuring performance.
Imagine a professional soccer player with a KPI that says 85% of his passes must be accurate. He could just play more short, simple passes in his own half. But does that necessarily help his team win?
The problem is that when a measurement becomes a target, it ceases to be a good measure. This is sometimes called Goodhart’s Law.
Understanding how people are performing in key areas can still be helpful, as long as everyone understands that each number is simply one piece of feedback in the overall system.
Done badly, KPI’s become a cheap substitute for strategic vision and good communication. And it’s a terrible substitute for good leadership.
We overcome Goodhart’s Law by sharing the WHY not just the WHAT and HOW. This connects KPIs to strategy so that people understand what the military calls the “commanders intent”.
Senior leaders must develop their communication skills so they can break down complex ideas and share them as simply as possible.
It’s the WHY that empowers people to make judgment calls and adapt to everyday, real world challenges.