“What gets measured gets done!”, is a truth which in many cases is close to a law of nature. In science we learn that you cannot measure a system without affecting it. The same holds true in organizations. By defining Key Performance Indicators (KPIs) and communicating this in the organization, you influence people’s behavior. Most likely you will get what is measured, and hence, you’d better choose your metrics carefully.
A clear example of how poorly defined KPIs can drive undesirable behavior is different forms of trouble shooting, such as test, verification or quality assurance. The objective of the trouble shooting activity is to ensure that the object is as free from errors and defects as possible, before it moves on to the next phase. It is important to keep in mind that the object will not be less free from defects once it is tested. It is only once the defects are rectified, that it is actually improved.
A manager of a testing business told me that they used the number of tickets reported on a test object, and that the objective was to find as few defects as possible. The target for a certain phase was to have less than 100 tickets. The consequences were dire and costly. The testers did whatever it took to meet the objective. It even went so far that when they approached the target, the testers stopped writing tickets in the trouble report system. Instead, a shadow system with post-it notes, which occasionally were lost, was used. There was great confusion. But the object did not improve.
If we take one step back, it is fairly obvious that a testing business should detect as many defects as possible. That is why the business exists in the first place. The earlier the defects are detected, the cheaper they are to rectify.
All kinds of trouble shooting businesses must have the objective to find as many problems and defects as possible, and to do this as early as possible. All KPIs may be subject to manipulation, and hence, it is of utmost importance to think twice about what behavior you want to drive in the organization.
What profitability metrics does your organization use? Absolute amounts or quotients (e.g. ROCE, ROS)? A quotient has a numerator and a denominator. Could it be the case that you are saying no to profitable business in order not to deteriorate your KPI? What gets measured gets done!