Management through KPIs is getting autonomous, that is, KPIs tend to hide the reality behind a new representation between the view we need to understand a system, and the system itself.
The story goes like this (slide show):
We see the reality through shared representations called models. They are equivalent to a shared map showing the territory (the classical difference between map and territory): KPI collection says something about the real system but is not the real system. If KPIs are crafted carrefully, they may say appropriate things about the system. If they are paired at design time with an action lever that acts on the real system, they may be used to shape the system according to necessity and constraints. If the system changes are then correctly conveyed to the representation through the same KPIs in a feedback loop, the model brought by the KPI set is usable and brings benefits.
But crafting relevant KPIs is difficult. You need to deeply understand the system and for human built ones, you need to design the system itself carefully in order to deduce correct KPIs (it’s all about deducing, not discovering nor inventing nor knowing by god miracle).
Hence the tendancy to build KPIs representing the reality we’d like to see or show instead of the, ’em… Real reality?
Action levers are then directed to act on the KPIs set instead of the real system. When it exists, the feedback loop avoids the reality. All appears as if to build a road you’d just have to draw it on a map and show the result to people interested in roads usage, avoiding the real hassle of actually building the road.
Paul Jorion has a good example of this phenomenon in a post about Dexia [fr].
The quota thing about criminality and police activities in France exhibit the same behavior, here debunked by Maître Eolas [fr].
The bias is clearly the same in the companies where managers use dashboards with a large set of irrelevant KPIs: they put pressure on people when the color turns red, people don’t know how to change reality to make them turn green so they modify the KPIs, usually by tinkering with the way they are computed. And the reality disappears behind a new virtual artifact.
It’s called the water-melon syndrome. Red inside, green outside.
Edited to add
Other indices of the reality under in daily life :