I’ve seen program management departments that get rated on how green their red/yellow/green charts are. So, they, invariably report out that programs are green and everybody wonders why they went off the rails at launch. I’ve seen entire companies with revenue objectives without any mention of margin. I’ve seen Purchasing departments track “savings” without regard for the increase in total cost of ownership their high-pressure tactics result in, down the road. I’ve seen engineering departments tracking on-time drawing release so they release blank documents with title blocks “on-time’, and everybody actually seems surprised when programs grind to a halt. Departments regularly track indicators for “their performance” that, if optimized, will result in a sub-optimization of the overall enterprise.
Entire organizations sometimes track the wrong data when being managed instead of led. For example, assume a company is investing heavily this year because a 4-year product cycle has ended and it is getting ready to launch new product for the next 4 years. For the last 4 years, tracking profit as a key indicator might reasonably be expected to tell you how efficient the organization was running. However, in the year of a new product launch, profit is being re-invested. Tracking profit should still be on the radar screen, but launch cost management is probably a new important factor. If the organization doesn’t adapt to their circumstances and adjust their expectations, they will drive each other crazy looking for whom to blame for the reduction in profit.
Where are the leaders in all of this? I’ve heard it said that managers do things right and leaders do the right things. People that are supposed to be leading get rewarded for managing systems and preparing reports on time instead of getting the desired results in a stable entrepreneurial environment. The higher the managers-disguised-as-leaders rise in the organization, the less efficient the operations run because processes and KPI’s multiply like the IRS tax code. The result is a drift away from lean, entrepreneurial conduct into an environment where everybody knows, precisely, what to track, but nobody knows why. Or worse, they think they do, but the overall results of the organization do not track to their metrics.
KPI’s should be decided on after the overall goals of the organization are defined. Each department should find the least wasteful, and most stable, way to make their contribution to the objective. As workload is divided, meaningful milestones should be defined to check progress of the data related to the work being done. Reviews of that data would, indeed, be key indicators of performance.