Why Do We Need KPIs or Performance Measures?

by Stacey Barr |

There are too many examples of performance measures resulting in resentment, gaming, and even illegal behaviour. Why do we need KPIs? Or can we manage without them?


Humans are inherently goal oriented. I immediately thought about a movie by M. Night Shyamalan, The Happening. Infected by a toxin, people are simply giving up their drive to live, giving up any goal at all to live for, and immediately commiting suicide.

It’s not that dire, of course. But our instinctive goal orientation is fundamental to the reasons why many of us measure performance, and why many more of us should.

But too many people have wrongly framed the reason why we measure.

The most common uses of performance measures cause their bad reputation.

The most common uses for performance measures are:

  • judging people’s performance
  • holding people accountable
  • reporting upwards to management or leadership
  • reporting outwards to stakeholders
  • covering bums
  • jumping through bureaucratic hoops (we just have to have them, no thought about why)

All the wrong uses.

But just like any kind of knowledge, isn’t it true that how they are used is up to the intentions and skills of the user?

Is it that measuring performance isn’t inherently bad, it can just be done badly?

Most of the horrific problems that measures are associated with is almost entirely caused by insufficient skills or unsavoury intentions in designing and implementing and using them.

The ranking of schools based on the results their students get in standardised tests isn’t done with bad intentions. But it’s done badly. Schools will only encourage the smart kids to sit for the standardised tests, for fear of poor results reducing their funding or making parents choose other schools. And this dynamic works against the ultimate intention of schools in society.

Measuring school performance can be done more sensibly to serve their ultimate purpose, like in this example of how to measure school effectiveness. But the question remains, why measure performance at all, if the risks are so high of doing it badly?

What special gift do performance measures have for humanity, that we can’t get any other way?

Is there something uniquely special about performance measures, that we really ought to develop the skills and clarify the intentions to master the measurement of performance?

Measurement is well accepted in many other domains of human life, like weight reduction, cholesterol management, vitals like body temperature and heart rate during surgery, and metering doses of pharmaceuticals.

We measure in these domains because measuring produces information with more objectivity, comprehensiveness, accuracy and speed than does human perception.

Numbers are the best way to answer “how much?”

Measuring puts numbers to things. Numbers are an objectively shared experience. We all understand and agree on what 1 is, how much it is, how much it is compared to 2 or 345. Numbers answer the question “how much?” more objectively, more quickly, more accurately, more easily than qualitative constructs like more, less, similar.

Business has complex processes, diverse customer and stakeholder needs and wants, many people with different experiences, opinions, values and knowledge. We want to know things like “how much” customer loyalty we have, or “how much” time is wasted in recruitment, or “how much” backlog of work there is.

If we relied on qualitative constructs that come from the opinions of different people, or a single person, we’d be little wiser. But if we measured these constructs, we’d know with much more certainty.

Measuring tells us what we can’t know through perception.

Performance measures are tools we use to guide us to achieve or improve the results that matter. And performance measures are essential for this, because they tell us what we can’t know in any other way:

  • They tell us how things are objectively, without the bias and distortion that compounds from varying points of view and interpretations.
  • They tell us how things are changing over time, something human perception does very poorly and with little objectivity.
  • They tell us which variations are real signals compared to the variations that are simply natural noise, where humans are notorious for knee-jerk reacting to every variation.
  • They tell us how things are everywhere that matters and not just what’s in front of us, and humans are renowned for biasing higher attention on what’s happening right around them.

Performance measures alone won’t ever give us the complete picture about performance. We do still need experience, knowledge and qualitative feedback too. But performance measures add something uniquely essential, so we can more quickly notice, agree on and investigate the results that matter most.

For tracking change over time, KPIs or performance measures are much more objective, complete, and accurate than human perception.
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What is the most common reason for measuring performance in your organisation? When might you find an opportunity to challenge any unhelpful reasons?

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  1. Joel says:

    I concur that the purpose of KPIs is to improve the results that matter. When you see the results and determine that the results are positive then all is well; however, there will be occasions when the outcomes are less than positive. As such, I would think that corrective action is needed. Obviously, corrective action calls for making an objective judgment on people’s performance and inherently it addresses accountability. Why would you not use KPIs to report upward to management or to the board if you were tasked with improving performance for your superiors and stakeholders? Seems to me that the reality of things is that we are held accountable and the use of performance measures is one way to address accountability. I would be interested in your approach to evaluating (judging) people’s performance, holding people accountable and reporting to stakeholders without the use of performance measures.

    • Stacey Barr says:

      Joel, as I’m not an expert in managing and developing people, I don’t have an approach to evaluating people’s performance. I am an expert in measurement, and part of what I know about measurement is that when it’s used to manage people, things go very wrong. Jerry Z Muller’s new book, The Tyranny of Metrics, sums this up undeniably with his thorough research on measuring people. It basically fails like this: https://www.staceybarr.com/measure-up/the-downward-spiral-of-measuring-peoples-performance/

      But please don’t think I’m asking you to take my word for it. I believe in evidence-based decisions, so what I’m asking of you and everyone else with the same question is to find the evidence of what actually happens when we measure people to judge them.

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