Beware the Attack of Killer KPIs

Beware the Attack of Killer KPIs

Corporate communicators increasingly have to combine the impartial skepticism of a journalist with the protective, risk detection skills of a lawyer to mitigate threats to their organization’s brands. Whether they are political postings by an executive or the unfortunate use of a product in a social protest, hidden risks abound. In fact, there may be one lurking in a PowerPoint deck somewhere in the organization following a slide stating “if you can’t measure it, you can’t manage it” – the killer KPI.

Certainly, key performance indicators, or KPIs, are important tools for business management. Yet, there are times when ill-conceived KPIs can engender bad, brand killing behaviors.

Take, for example, Wells Fargo and its evolving controversy over sales people opening fake accounts for its customers. The scandal was first exposed a year ago when federal regulators found that since 2011 Wells Fargo employees created millions of unauthorized bank and credit card accounts without their customers’ knowledge. More recently, the number of ghost accounts was found to be even higher than initially thought – 3.5 million vs. 2.1 million – and that fraudulent online bill enrollments were also part of the sales padding.

The root cause? Many believe it was the easy-to-remember sales KPI “eight is great,” which articulated success as having Wells Fargo customers sign up for eight products per household. When sales people found achieving this goal too onerous, they improvised. The killer KPI ended the careers of 5,300 employees and continues to pile soil on the Wells Fargo brand.

In the aftermath, some analysts blamed the crisis on a KPI that was not customer-centric, suggesting that customer facing KPIs are more benevolent. However, going back a few decades, Domino’s Pizza found that isn’t always the case.

Starting in 1984, the quick-service chain built its brand upon a KPI that was a pizza-lover’s dream: The guarantee that your pizza would be delivered in 30 minutes or less or it would be free.

The speed-based KPI helped the company become the largest pizza delivery restaurant in the world, but there were unintended consequences. Juries in multiple states found that the 30-minute KPI encouraged reckless driving by delivery people and held Domino’s responsible for related accidents and injuries. The largest award was $78 million to a St. Louis woman who suffered head and spinal injuries when struck by a delivery driver. Domino’s ended the 30-minute-or-free offer nine years after its introduction and began repairing the damage to its brand.

A more recent example of a customer-centric KPI gone bad is the notorious airline passenger dragging incident. Yes, on-time departures and arrivals are what customers want, but it’s still a bad look when one of those customers ends up battered and bruised in pursuit of the goal.

Higher Stakes

In the same way that killer bee stings don’t always kill, brand damage from killer KPIs is survivable. However, the injury to a company’s reputation may be deeper and longer-lasting as investors increasingly examine business relationships and how an organization interacts with employees, customers and the public.

According to the 2017 G&S Business Communications Sense & Sustainability® Study, when investing, Americans are particularly guided by environmental, social and governance (ESG) issues that highlight the business impact on individuals. In a survey of 1,158 U.S. adults, of which 53 percent make investments, the investing consumers are most influenced by strong customer relationships rooted in respect (81 percent) and a positive reputation earned for ethical practices by management (74 percent).

This may be the reason fewer companies follow the well-worn KPI espoused by Nobel Laureate economist Milton Friedman that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.” Also known as shareholder value thinking, this profit-as-measure-of-success metric was deemed “the dumbest idea in the world” by legendary former GE CEO Jack Welch who said, “shareholder value is a result, not a strategy … your main constituencies are your employees, your customers and your products.”

A Communications Challenge

By and large most killer KPIs are rather innocuous at first glance. It’s hard to argue that more product sales, higher profits, on-time flights and fast pizza delivery are bad things. Things start to go awry when these institutional goals are allowed to become monolithic in the eyes of management and employees.

To protect brands, communicators must scrutinize KPIs, game out how they may drive employees to bad behaviors and plan to mitigate those actions through clearer language, revised emphasis or associated KPIs.

As Jack Welch pointed out about the foolishness of shareholder value as a singular metric, focusing on a result often makes for a poor KPI. Certainly, a company like Unilever wants to be profitable and have households buy multiple products in their portfolio. However, two of its guiding KPIs are to improve health and well-being and enhance livelihoods. Given Unilever’s portfolio of food, health and home care products, chances are achieving those KPIs will lead to greater financial results.

Communicators need to analyze the KPIs within an organization, particularly those that help define the company and its operating principles. Consider the effect of these measures on the human psyche: What bad behaviors can lead to KPI fulfillment? Brainstorm how you can articulate a goal to exclude bad behaviors but still accomplish the desired result. Be a lawyerly journalist now to identify and root out killer KPIs before they strike or be prepared to become a crime scene investigator looking for clues of why the company’s brand is on life support.

Ron Loch is Managing Director, Chicago, G&S Business Communications. In a competitive global marketplace, Ron helps businesses gain by doing good. A G&S veteran, Ron’s collaborations with global Fortune 1000 companies and green business start-ups have delivered strategic, integrated programs to gain value from sustainability efforts and commercialize clean technologies. Ron oversees publication of the annual G&S Sense & Sustainability® Study, which gauges public perceptions of the corporate commitment to environmental and social responsibility. He also moderates many of the firm’s thought leadership events, which have welcomed speakers from Businessweek, Burt’s Bees, Verizon, Time Magazine, The Sustainability Consortium, The World Food Prize Foundation, U.S. Green Building Council, U.N. Global Compact, and more. Ron graduated with a B.S. in Journalism and Mass Communications from Iowa State University and received a Master’s Certificate in Managing the Sustainable Enterprise from the Illinois Institute of Technology Stuart School of Business. He has also completed the certified GRI sustainability reporting curriculum. Ron hones his crisis management skills by tackling obstacles in Spartan races.

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