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Since I wrote the first edition of this book, I have become acutely aware of the reasons why KPIs are failing. This third edition is my latest attempt to circumnavigate around the negative forces that are, not only limiting the effectiveness of KPIs, but, are inhibiting many enterprises from becoming future ready.

Myths Surrounding KPIs

Before we can enter into the discussion of implementing KPIs, we need first to examine why you want performance measures in your organization. There can be many reasons and some will most certainly lead to failure. Thus, I have looked at some of the myths around performance measurement.

One main factor is a lack of understanding of the myths surrounding performance measures.

Just like six centuries ago when the belief that the world was flat held back progress, we are blindly applying old thinking to how we measure, monitor, and improve performance (see Chapter 2 on the Myths of Performance Measurement).

Unintended Behavior: The Dark Side of Performance Measures

Measurement initiatives are often cobbled together without the knowledge of the organization's critical success factors and without an understanding of the behavioral consequences of a measure. Chapter 3 explains that every performance measure has a dark side, a negative consequence. The key is to understand it. Well over half the measures in an organization may be encouraging unintended behavior. This book will repeatedly drive home the importance of understanding this dark side and selecting fewer measures, as well as selecting those with a minimal negative consequence. How performance measures can go wrong can be illustrated by the train service and hospital stories featured in Chapter 3.

The Misuse of KPIs in Performance-Related Pay

KPIs are frequently used in performance-related pay contracts. This turns the measure into a Key Political Indicator, one which will be manipulated. In Chapter 2, I will address why KPIs, as defined in this book, should be “tickets to the game” and never part of a reward structure.

In Appendix A, I set out my thoughts on the foundation stones of performance-related pay.

Reasons that the Traditional Balanced Scorecard Approach has Failed

Nobody has done more than Kaplan and Norton to ensure that strategy is balanced, well thought through and its implementation is monitored and managed.

The Harvard Business School paper was a masterpiece and the following book “The Balanced Scorecard: Translating Strategy into Action” a classic from inception. As a writer I can appreciate the herculean effort Kaplan and Norton undertook to amass so much case study material in such a short time.

However, I have been concerned for over ten years now as to why so many balanced scorecard implementations fail to deliver when the concept of implementing strategy and having a balanced performance is surely a given with most of us.

I address, for the first time, the main differences between the “winning KPIs” and the balanced scorecard methodologies. I will also discuss my reasoning for the balanced scorecard failure rate and argue that the balanced scorecard fraternity needs to update their methodology (see Chapter 18).