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KPI Theater Needs a Final Curtain

1–2 minutes

KPIs sound intelligent in meetings, look impressive in reports, and are praised as practical applications of analytics. Yet, they are frequently misused, sometimes with damaging consequences, and it’s time we re-evaluate how they are applied.

The Problem With KPIs

KPIs are a useful concept, but they have become cheat codes that mask the absence of real progress. Instead of tackling the real, complex problems, attention shifts to solving the simpler ones that happen to be measured.

KPIs started as tools to show progress towards achieving objectives. They've become objectives targeted for completion. They are headed towards becoming shortcuts that give the illusion of progress.
Goodhart: "when a measure becomes a target, it ceases to be a good measure"

Incorrect Target Objectives

By definition, KPIs are only indicators, not targets. In some cases, it is even questionable whether they reflect key insights or simply misinterpreted correlations. The real targets should be the actual goals tied to the customer’s business problems. These goals must be clearly defined, and every action should be aligned with achieving them.

KPIs are not targets. Targeting KPIs can lead to taking actions only to improve KPIs which leads to worsening actual business goals. It can lead to only focusing on KPI values which leads to not targeting actual business goals. KPIs serve as measures, not targets, and should not replace actual goals.
Goals are targets. Targeting goals will lead to taking actions only to improve goals which will lead to improving actual business goals. It will lead to only focusing on goal values which will lead to targeting actual business goals. Overall, this will also lead to improving KPI values. Actions should always be guided by actual business goals.

Targeting KPIs Can Worsen Outcomes

Table turnover is a common restaurant KPI built on the idea that serving more diners leads to higher revenue. But when this number becomes the target, it can lead to misplaced priorities and worse outcomes. The real focus should be on what actually matters to the business: growing revenue.

Example of KPI targeting: Table turnover. Taking action sonly to improve this KPI such as rushing customers to leave, compromising food quality, overcrowding the restaurant, or stressing staff to boost KPI will lead to improving the KPI but worsening the ultimate goal which is increasing revenue. Targeting KPIs can result in worsening goals.
Goal targeting example: revenue. Taking actions to improve goals such as optimized restaurant layout, better payment systems, improved kitchen efficiency, or streamlined ordering process will result in improving the goal of increasing revenue and also improving the table turnover KPI. Targeting goals makes sure goals are improved.

Is This a Call to Get Rid of KPIs?

This is a call to end the misuse of all measures. KPIs have significant issues that, if not fully addressed, can do more to hinder business goals than help achieve them. Furthermore, analytics is not just about monitoring data; it involves a complete cycle that includes observing, understanding, and taking action based on a well-defined problem.

KPI issues. Is it key or unrelated to actual goals? Is it performance or targeted for quick and easy wins? Is it indicator or is more required to be useful?

Focusing on clear, measurable goals is essential to making analytics effective. Without them, the process can quickly become costly and unproductive. Setting tangible goals at the start lays the groundwork for meaningful results. Once the customer identifies their goals, Advanata easily structures the rest using the business problem framework and effectively provides a clear, actionable solution.

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