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Reexamining the Seven Deadly Sins of Performance Measurement

One of the most common uses of business intelligence (BI) is to support performance measurement.  BI collects the actual values of the metrics, compares them to targets, shows trends, highlights anomalies, and so on.  And it does a good job of that.  Yet many organizations struggle to realize the performance improvement and accompanying better business outcomes they seek.  Why are good results so hard to achieve?

The challenge, we often find when working with our consulting clients, lies not with the BI but with the underlying performance measurement system.  After all, if the organization is measuring the wrong things, even perfect BI won’t yield better business results.

I recently ran across a new book by the late Michael Hammer (one of the authors of the classic Reengineering the Corporation) and Lisa W. Hershman titled Faster Cheaper Better: The 9 Levers for Transforming How Work Gets Done.  In it, Hammer and Hershman examine the problem of flawed performance measurement systems in a section they describe as the seven deadly sins of corporate measurement. Below, I’ll provide a brief description of each sin, as well as examples of each that we’ve come across in our experience.

Sin #1: Vanity

Use of measures whose sole purpose is to make the organization, its people, and especially its managers look good

Example: In customer service, comparing the actual shipment date to the latest promise date given the customer, rather than to the customer’s requested shipment date

Sin #2: Provincialism

Permitting organizational boundaries and concerns to dictate performance metrics

Example: Sales says: make the products for which we can get customer orders; Supply Chain says: sell the products we already have in inventory

Sin #3: Narcissism 

Measuring from one’s point of view, rather than from the customer’s perspective

Example: Measuring fill rate of individual components, when the customer must receive all the components on the order to have a working system

Sin #4: Laziness 

Assuming you know what is important to measure without giving it adequate thought

Example: A utility company assuming that customers want a service appointment as soon as possible, when what customers really want is for the service rep to consistently show up on time for the appointment

Sin #5: Pettiness

Measuring only a small component of what matters

Example: Focusing on minimizing transportation cost, when a broader and more meaningful metric is total supply chain cost

Sin #6: Inanity 

Implementing metrics without any thought to the consequences – how they will drive behavior and thereby affect enterprise performance

Example: A manufacturing company wanted to reduce inventory obsolescence of its finished goods.  In an effort to do that, the production manager changed the manufacturing strategy for the problem products from make-to-stock to make-to-order, not stopping to realize that customers’ order lead-time requirements could not be met by making to order.

Sin # 7: Frivolity 

Not taking measurement seriously

Example: Continually re-debating metric selection, calculation, and targets, rather than leveraging the information to improve performance

These sins are ubiquitous.  We see them all the time in our consulting work, and you probably have experienced them, too. If any of these seven deadly sins of performance measurement are present in your organization, you must address them as a key component of BI readiness before forging ahead with your BI initiative.  Otherwise, the BI systems you implement risk not delivering on their potential bottom-line impact.

By Bill Collins

Created by Matrix Group International, Inc. ®