The short answer is yes, KPI stifle creativity. However, when you peel back the onion, the root cause of stifled creativity isn’t as obvious as it first appears. This post will investigate the root cause of why KPI goes bad.

The three steps to stifle creativity

The corruption of key performance indicators is so common that there is a simple three-step death loop that most broken systems follow. Both Goodhart’s Law and Campbell’s Law document a very similar corruption process. I have outlined the three steps in the following paragraphs.

STEP 1 – Metrics becomes subject to corruption pressure – There are often other economic benefits attached to the outcomes of key performance indicators. The economic benefits attached to the KPI often include sales commission, increased budgets, or other financial incentives. The incentives put pressure on the data collectors to meet KPI targets. The larger the incentives for meeting targets, the greater the pressure to falsify data.

STEP 2 – Metrics becomes a target rather than a measure of success – If the incentives are large enough, then the pressure on people collecting data can be quite intense. If failing to meet a target carries significant consequences, meeting targets becomes a priority. “When a measure becomes a target, it ceases to be a good measure.” The change in intent from continuous improvement to meeting a target compromises the data. Data collectors motivated by greed instead of constant improvement can create unintended consequences.

STEP 3 – Metrics corrupts the process they monitor – The unintended consequence of using metrics to measure success is that the people collecting data falsify the results. Falsifying the results being collected compromises the data integrity. When the integrity of the data is compromised, the system can break down. Compromised data invalidate the measure of success and tends to corrupt the system.

Conclusion

Yes, KPI can stifle creativity. KPI stifles creativity when the intent of the people collecting the data is motivated by greed instead of objectivity. If data collectors intend to game the system, then the system’s integrity is compromised. Corrupt the measure of success, and the KPI results are meaningless. There is an old saying, “Garbage in equals garbage out.” The next post in this series will look at specific examples where key performance indicators didn’t work. However, there is certainly no shortage of examples of KPIs that have gone bad!

Cheers, Ian Paul Graham “I help startup founders find product-market fit and build digital demand teams.”

If you liked this blog post you may also enjoy this downloadable document on the theory and practice of Goals & Key Performance Indicators.

You can find the downloadable guide here.