The 7 Deadly Sins of Performance Measurement and How to Avoid Them

Operational performance measurement remains an unsolved problem. Despite the relatively little attention it gets in the management literature, designing and using metrics to track and improve operating performance is one of the most persistent problems that organizations face. In my interactions with companies in virtually every industry, I scarcely ever encounter one that believes it has an effective set of metrics for their operations: manufacturing, customer service, marketing, procurement and the like. To be sure, companies do have measurements for these areas that they employ every day, but few managers or staff believe that these metrics are the right ones or that they help the company improve its performance and achieve its strategic goals.

This is remarkable for two reasons: First, operational performance measurement is so fundamental to basic operational management that it should presumably have been resolved a long time ago; second, in the last several years companies have developed much more sophisticated strategic measurement systems, based on such tools as the balanced scorecard, key performance indicators, computerized dashboards and the like. Nonetheless, among the hundreds of managers with whom I have discussed this matter, there is a widespread consensus that they measure too much or too little, or the wrong things, and that in any event they don’t use their metrics effectively.

The most striking manifestation of this problem is that many of the operational metrics that companies commonly use make little or no sense. I have found that organizations fall prey to a half dozen or so recurring mistakes in defining and using metrics, mistakes that seriously impede the relevance and usefulness of their operating measures and that help explain the widespread malaise about measurement that they feel. I call these the seven deadly sins of performance measurement, and, like the seven deadly sins of theology, they present grave dangers, if not to the prospects for the immortal soul, then to the prospects for superior business performance.

1. Vanity

One of the most widespread mistakes in performance measurement is to use measures that will inevitably make the organization, its people and especially its managers look good. As one executive said, “Nobody wants a metric that they don’t score 95 on.â