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Setting KPI’s – Think It Through or You Might Just Get What You Asked for

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Setting KPI’s – Think It Through or You Might Just Get What You Asked for

In case you haven’t heard, Australia is going to have a Federal election this year. That means we will be subject to all manner of prognostications and promises from the political parties as they try to win our favour – and our vote.

In order to gain a short term advantage, i.e. the chance to control the political agenda and the Treasury for three years, they will come up with all sorts of schemes and policies.

But here’s the thing:

Most of these schemes and policies haven’t been thought through beyond the immediate electoral appeal.

We have had a perfect example of this in the very recent past, and it involves cane toads. It was completely divorced from reality, with seemingly no attempt to see beyond the first, superficial level of thinking. A complete absence of thinking things through.

We all know that cane toads are a curse on the Australian environment. They are highly toxic to other animals, both native and non-native, and have been responsible for several extinctions of our wonderful wildlife.

This politician’s solution was to pay a bounty of 10 cents for every cane toad captured and handed in. At first glance, you may think, “What a good idea. Kids can earn some pocket money, and it will help the environment.” Apparently the unemployed were to be co-opted into the collection as well.

But if you stop for a moment and think it through …

As something of an entrepreneur, I immediately saw an opportunity. Rather than staying out at night chasing toads around the garden, I could set up my very own Cane Toad Farm. Given that the cane toad’s prolific reproduction rate is the cause of the problem in the first place, I’d be raking in the (Government) cash in no time.

Before you think ill of me, I would not put those thoughts into action. However, I can guarantee that:

  • plenty of others would see the same opportunity, and
  • some of those people would waste no time in establishing their cane toad farms.

I could cite many, many more examples of Government projects blowing up because the planning process didn’t go far enough. Remember the Pink Batts Scheme?

Now, bring your thinking down from Government to company level. Here, one of the best places to see ‘Not Thinking it Through’ behaviour is in the design of Performance Measures and Rewards.

We don’t have to look far for an example. The Banking Royal Commission revealed a litany of unethical and even illegal behaviour – all encouraged by performance measures and the rewards schemes built around them. If you receive a bonus when a customer takes out a loan or buys a superannuation product, what are you going to do?

Setting KPI’s is fraught with danger.

I have another lovely example from the mining industry. Safety is, naturally, a huge focus of this industry, and ‘Safety Interactions’ are common. A company representative will accompany you while you are working on the site to examine your safety practices and work methods.

In this particular mining company, a Key Performance Indicator (KPI) was the number of safety interactions that everyone performed, and apparently, bonuses were tied to this measure. Our particular site contact was obviously saving for a house or an overseas trip. The monthly graph of Safety Interactions by Staff Member looked like this.

 

Bronwyn Reid

Apart from the financial cost to the company, it was also a cost to us. While safety interactions certainly help with safety, they also lower productivity. Obviously, balancing these two objectives is the ideal, but our friend was clearly out of balance!

Dysfunctional KPI’s are everywhere.

I have seen project managers almost come to blows over cost allocations to their projects because their rewards were related to project profit margins. People would run vehicles until they were almost out of fuel so the fuel cost would be allocated to the next project using the vehicle. Yes, really.

As we head into 2019, I implore you to practise your ability to ‘Think Things Through’.

  • For every action, you take in your business, take the planning process those few steps further. If we do this, what other things could happen as a result?
  • Review all your Performance Indicators. Do they encourage productive and profitable behaviours?

And most importantly …

Examine all the politician’s promises with forensic intensity. You can be sure that it will have at least some ‘cane toad’ elements!

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