What the KPIs hide

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Kimberly DeCarrera appreciates measuring KPIs (key performance indicators) as much as any business leader. But she has also encountered situations over the years when dashboards obscured reality.

DeCarrera, a fractional CFO and general counsel, recalled working with a logistics company that measured how much time its brokers were spending on calls. The thinking was that the more time they spent making calls, the more work was being accomplished.

“But then we found that some were just calling themselves or friends and family to chat all day,” DeCarrera said.

Oof.

“We had to drastically reframe the KPI and the reporting related to it, to ensure that the calls were legitimate calls to people associated with clients or vendors and moving the company forward,” she said.

Sometimes the numbers tell the story. Sometimes they don’t.

Goodhart’s Law, named after economist Charles Goodhart, states: “When a measure becomes a target, it ceases to be a good measure.”

Or put another way, once a metric is used as a goal for performance or policy, people may change their behavior to optimize for the metric itself — which often undermines the original purpose of the measurement.

“Most KPIs are autopsies. By the time a metric like ‘churn’ flashes red, the customer has been unhappy for months,” said Aditya Nagpal, founder and CEO of Wisemonk, an India-based Employer of Record helping global companies hire and manage talent in India compliantly. “Leaders hide behind these numbers because they are safe, but they trail reality. I force my leadership team to value qualitative dissent over quantitative comfort. If the data says ‘customers are happy’ but the support team feels uneasy, trust the support team. The intuition of your frontline staff is a leading indicator; the dashboard is just a lagging receipt.”

Financial KPIs commonly report on decisions made six months to two years ago. Research shows that cultural decline, employee disengagement, and customer patience can deteriorate long before the metrics indicate a problem.

Kyle Tucker spent years in investment banking and now runs the holding company Tucker’s Farm Corp., which aims to deploy $100 million of long-duration equity capital each year (while still maintaining its goat dairy roots).

Tucker thinks about it this way:

1. What gets measured gets managed. “This cliché is true,” he said.

2. KPIs need to be paired with incentives.

3. KPIs need to be leading indicators, not lagging indicators. “Lagging indicators (revenue, profit, etc.) are ultimately what you care about, but they are not as tangible or immediate as leading indicators (customer response time, etc.),” he said.

4. Important KPIs are often hard to measure consistently and accurately, especially if they are self-reported or new. “This squishiness creates room for gamesmanship in how a team member reports,” Tucker said. “It’s natural, but as a leader you need to watch your dashboard closely and dig in periodically, especially if you see lots of green light.”

5. If you care about everything then you care about nothing. “It’s OK to track a lot of data if you can do it efficiently, but you need to ruthlessly remove KPIs that are meaningless or unused,” Tucker said. “It also helps to have one big number that everyone cares most about.”

6. Ideally you have two team members measured on the same KPI. “This creates benchmarking and healthy competitive tension,” he said.

High performance driven by hard-working star employees, burnout, and unsustainable effort can result in green dashboards. Sometimes leaders mistake intensity for health while, in their blind spots, systems are breaking. 

Nell Derick Debevoise Dewey, a leadership adviser, shares Tucker’s enthusiasm for removing metrics that don’t meaningfully serve the business. She even distributes a “To-Don’t list” to help clients identify things they can stop doing to reallocate time, attention, and energy to more useful tasks.

“Leaders get in trouble when they treat indicators like proof. I’ve seen it everywhere I’ve worked, especially nonprofits where measurement is essential but easily weaponized,” Dewey said. “The numbers look tidy, but the real impact —  i.e. the kind that changes lives — gets pushed aside because it’s harder to quantify.

“So when I talk about metric saturation, dashboard theatre, or ‘strong performance’ masking burnout, it’s not abstract,” she added. “It’s what happens when we only track what we add, never what we successfully do less of. The shift I help teams make is simple: use data to prompt subtraction. Not ‘What more should we do?’ but ‘What can we stop, simplify, or release because it’s no longer serving our customers, team, or mission?’ 

“When leaders start measuring what they’ve removed, and the impact it has on what's left, the numbers reveal the business's equivalent of lives saved,” Dewey said.

Harvard Business School’s Amy Edmondson is the world’s leading researcher on psychological safety in the workplace, which is highly predictive of team performance, but difficult to measure.

Edmondson’s work demonstrates how KPI dashboards almost always miss these more nuanced, emotional-intelligence metrics, such as:

• Trust
• Internal relationship breakdowns
• Decision quality
• Customer patience
• Early-stage innovation failures
• “Shadow processes” that employees create to get work done

“This is absolutely a leadership issue,” said Jordan Grenadier Murphy, a communications and marketing consultant. “Every time I’ve seen KPIs get misread or misused it all starts at the top. The numbers themselves aren’t usually the problem, but it’s how people are interpreting them, or trying to make them look a certain way, because they’re trying to protect themselves or prove they’re doing a good job.”

This is especially problematic for company marketing budgets because they are often the first area of cost cutting, Murphy said.

“Marketing data doesn't speak for itself; someone has to explain what it means,” she said. “And when you have someone who’s worried about job security or perception, they’re going to highlight the most exciting numbers — impressions, reach, clicks, whatever — because those feel impressive, But that doesn’t mean those numbers tell you anything useful.”

Murphy advocates for business leaders to develop data fluency and contextualize what the metrics mean for an individual organization.

“Leadership has to actually understand what they’re looking at. Not in a way that requires them to be subject matter experts, but enough to know when something doesn’t add up,” she said. “I’ve seen so many executives get excited about viral content or big impression numbers when none of that ties back to actual business goals. If you don’t know the difference, you’re going to get sold on a story that isn’t real.”