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Key Performance Indicators: Developing, Implementing, and Using Winning KPIs, 3rd Edition by David Parmenter

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Chapter 2The Myths of Performance Measurement

Since the second edition was published I have become increasingly aware that key performance indicators (KPIs) in many organizations are a broken tool. Measures are often a random collection prepared with little expertise, signifying nothing. KPIs should be measures that link daily activities to the organization's critical success factors (CSFs), thus supporting an alignment of effort within the organization in the intended direction. I call this alignment the El Dorado of management. However, poorly-defined KPIs cost the organization dearly. Some examples are: measures gamed to the benefit of executive pay, which leads to the detriment of the organization; teams encouraged to perform tasks that are contrary to the organization's strategic direction; costly “measurement and reporting” regimes that lock up valuable staff and management time; and a six-figure consultancy assignment resulting in a “door stop” report or balanced scorecard that doesn't function well.

Let us now look at the myths surrounding performance measures.

Myth #1: Most Measures Lead to Better Performance

Every performance measure can have a negative consequence ...

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