[watwut]

The trouble is, the decisions based on KPI do not take these things into account. They are usually made up in the hierarchy by people entirely detached from what is done day to day. They usually do not know the harm done and wonder where the company is loosing money.

Your combination of multiple KPI amounts to somewhat more complicated KPI. There will be perverse incentives unless you get perfectly right. And that is possible only if the work, including the long term consequences of decisions, are easily quantifiable - which is not the case of most non-trivial jobs.

[markgraydk]

I agree that KPIs are misused quite a lot but that does change the fact that they can provide valuable information and setup incentives to follow certain goals.

I think it is rather simplistic to say that having more than one KPI can be reduced to "a more complicate KPI". Sure, it won't solve all problems with badly setup KPIs but to allow for detailed incentive structures you need detailed KPIs.

My major point is still that decision making based on KPIs should not be made solely on what the figures (or any red/yellow/green flag next to it) show. It requires analysis - which is something that I've always seen done.

The good thing about KPIs is that it can be a great communication tool and open discusions about why a trend has changed or similar things.

[TeMPOraL]

> I agree that KPIs are misused quite a lot but that does change the fact that they can provide valuable information and setup incentives to follow certain goals.

The problem is that KPIs are misused like, 99.9% of the times, starting from elementary school. It's rare to see someone using such scores as (one of many) evaluation input and not an output. It's good that you put effort into doing real analysis; sadly, not many people do that.

I think that KPIs, or grades, let you as a manager/evaluator be lazy. You don't have to think, to investigate why the scores are bad, to talk with poor performers. Probably you'll be even discouraged from doing so by your superiors / the whole system - you are not allowed to completely disregard the scores at your discretion.

[markgraydk]

Sadly, you are probably right, at least that the majority of cases misuse KPIs. But dont throw the baby out with the bathwater. KPIs reveal patterns, force you attention towards certain issues and create a base for discussion. They can also pidgeon whole you into misunderstanding what is happening though.

In my experience, KPIs work better as a tool for communication and as input for analysis rather than for optimization of goals. In a previous job I worked with aggregating the Balanced Scorecard for a 10,000 employee corporation. On such an aggregate level where the KPIs are composites of many underlying decisions there is less of a risk of perverse incentives. Instead, they are used for comparing trends across time and similar purposes.

KPIs targeted at individuals or smaller teams are very different than that example though.