Time for a KPI reset – why 2025 demands a new measurement mindset

15 Jan 2025

This blog covers: 

• Why commonly tracked KPIs can drive counterproductive behaviors and business conflicts 
• How to transform your metrics framework from passive reporting into active performance improvement 
• The essential elements of an effective KPI system that aligns with genuine business objectives 

At the start of 2025, teams worldwide are engaged in their annual ritual: setting up KPI charts for the year ahead. Before I joined Oliver Wight, I used to be one of them, diligently preparing spreadsheets and dashboards in those first few days back at work. I realized the flaws of this necessary exercise long ago, but many others have not. 

The charts looked impressive, the metrics seemed solid, and everything felt adequately organized for the year ahead. But here's the uncomfortable truth I've learned after years of business transformation work: many of these carefully crafted KPI frameworks aren't just ineffective but actively harmful to business performance. 

I've witnessed organizations tracking upwards of 250 different metrics yet struggling to drive any meaningful improvements. Worse still, many of these metrics actually create conflicting priorities and drive counterproductive behaviors across various business functions. It's more than a waste of time. 

This reminds me of the story of seven monkeys in a cage with a banana. When any monkey tried to grab the banana, they received an electric shock. Soon, they learned to avoid it. As each monkey was replaced with a new one, the existing monkeys would prevent the newcomer from reaching for the banana – even after the electricity was removed. Eventually, none of the monkeys would reach for the banana, though none knew why.  

Many organizations' KPI practices follow a similar pattern: we inherit measurement systems without understanding their original purpose, continuing them simply because "that's how we've always done it." Like those monkeys, we're conditioned to follow these practices without questioning their value or relevance to our current business needs. 

 

When good metrics go bad 

Many organizations unknowingly damage their business performance by relying on metrics that seem logical at first glance. Take cost per unit – a metric that appears foundational but often creates serious operational conflicts. Manufacturing teams under pressure to improve this number typically prioritize high-throughput products over actual customer demand. This logic leads to the wrong products being made, bloated inventory levels, poor service performance, and eventually, costly fire sales to clear excess stock. 

The problems don't stop there. Many businesses track the "number of low stocks," thinking it helps maintain healthy inventory levels. In reality, this backward-looking metric triggers unnecessary panic across the organization, with departments frantically bombarding planning teams to adjust schedules. These urgent interventions often prove pointless, as forward-looking MRP systems may already have production scheduled to address future needs. 

Manufacturing teams particularly favor the "units per person" metric, but this might be the most problematic of all. While it claims to measure productivity, it encourages overproduction of easy-to-manufacture items at the expense of products customers need. The ripple effects are significant - material shortages for critical items, unexpected warehouse congestion, and, ultimately, deteriorating customer service. 

 

Building a framework to drive performance 

Transforming your KPIs from potential liabilities into genuine performance drivers requires a fundamental shift in approach. Start by examining every metric through the lens of behavioral impact. Look beyond what a metric measures to understand what behaviors it encourages across different business functions. A seemingly positive improvement in one area might be creating unexpected problems elsewhere. 

Robust root-cause analysis capabilities form the next critical building block. When performance deviates from expectations, you need the ability to understand why quickly. This goes beyond simple data collection. It demands the right combination of tools, expertise, and cross-functional collaboration to identify and address underlying performance issues. 

Equally important is establishing clear ownership and accountability while maintaining cross-functional alignment. Each metric needs an owner who deeply understands what they're measuring and how their metric impacts other business areas. This ownership must extend beyond tracking numbers to include driving improvements that benefit the entire organization. 

The most crucial step is the boldest: stopping the measurement of things that don't drive action or, worse, drive the wrong actions or behaviors. Take a hard look at your dashboard. If a metric has remained stable for years or creates cross-functional conflicts, question whether it deserves to stay. Your KPI framework should be lean, focused, and perfectly aligned with your overall business objectives and strategic intent. 

Breaking free from counterproductive measurement starts with asking yourself some fundamental questions: 

• Do your metrics drive behaviors that support overall business objectives and strategic intent? 
• Are your functional areas' KPIs working in harmony or conflict? 
• Can you clearly translate metrics into coordinated improvement actions? 

Your goal shouldn't be to create the most comprehensive set of metrics or the most visually appealing charts in order to fill out a slide deck. Instead, focus on driving genuine business improvement through meaningful measurement and active management. Start small. Choose one metric that's remained unchanged for years. Question its purpose, examine its behavioral impact, and either transform it into an actionable tool or remove it entirely. Then move on to the next one. 

Let 2025 be the year you transform your KPIs from potential barriers into powerful catalysts for organizational success. 

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