Why do we (really) use KPIs?

As stated in my previous blog, KPIs are used to measure performance. But why are we so fond of KPIs? What makes this tool so popular? In order to find the answer we have to ask ourselves what specific need is satisfied by KPIs.

Let’s start with the most basic need of all living things on this planet: survival. Above anything else, we want to survive.  Many different survival strategies have evolved and we humans seem to be particularly good at it. One of these strategies is to overcome our instincts and make decisions based on our experiences in the past. This strategy is not unique to humans, but our highly developed brains enables us to apply this strategy more intelligently than many other living things. It is good to know that almost all our decisions are made unconsciously. It would be very tiresome if we made all our decisions paying full attention.

Our brains operate as an efficient automatic pilot that is constantly making decisions in split seconds. There is also also a non-automatic brain mechanism that can take over, but it is slower and can perform more difficult tasks that need focus and concentration. The two systems are best illustrated with an example. Do you remember all the decisions you had to make in order to read the first 220 words of this blog? Probably not, but still you understood what was meant. Now try to solve the following puzzle.

You have been given the task of transporting 3,000 apples 1,000 miles from Appleland to Bananaville. Your truck can carry 1,000 apples at a time. Every time you travel a mile towards Bananaville you must pay a tax of 1 apple but you pay nothing when going in the other direction (towards Appleland). What is highest number of apples you can get to Bananaville?

Solved it? Probably not. You might have read it, but decided (somewhere around the word “tax”) to read on and (maybe) try the riddle later. Using your non-automatic brain function is time consuming and tiresome!

In order to execute this extremely difficult task of constant decision making, our (automatic) brain organizes all stimuli in tidy, simple, predictable, and coherent patterns. These patterns are stored in our memory which provides the different brain functions with the necessary background information to make all sorts of decisions. The outcome of the decision is stored and used again later (and so forth, and so forth). So our brain needs information to make all these decisions. The more this information is already structured, the faster it can be processed. The fast brain system therefore loves stereotypes, recognizable patterns (even when they are not there), certainty, confirmations, easy to solve questions, etc.

This sounds like a rock-solid and infallible system, that improves itself by learning and development. But this fast decision making machinery comes with a price. Our brains need to take short-cuts to be this fast. It sometimes replaces complex information or questions with simpler ones just to be able to process it faster. It tries to avoid potentially costly decisions and tends to take the path for which the outcome is the most certain. This makes our (auto-pilot) brain a risk averse decision maker. Furthermore it makes us rather choose a sure thing of less value over something with more value but which is more uncertain. In short, the brain system we use the most is risk averse, loss averse and as efficient as possible.

Now let’s go back to question why we like KPI’s so much. When we use KPIs our subconscious brain is immediately satisfied in many ways. The information provided is structured and someone already used the non-automatic part of their brains to do the hard work (selection the indicator, threshold, visualization, etc). KPIs are most often visualised and easy to interpret (using dashboards, graphs and traffic lights). They give the illusion that we can reduce the complex world to simple, tidy and coherent patterns. But most of all it provides us with a ready-to-use risk and loss avoidance toolkit. KPIs suggest that we understood the past and therefore are able to predict and guide our decisions. Decisions made on KPIs give the impression that we can avoid uncertainty, foresee risky events and prevent loss. In other words, the KPIs fulfill our needs and serve the decisions on a silver platter. No wonder we can’t get enough of KPIs!

Coming up next time: We're going to make a KPI!

Answer to the riddle: 833 apples.

• Step one: First you want to make 3 trips of 1,000 apples 333 miles. You will be left with 2,001 apples and 667 miles to go.
• Step two: Next you want to take 2 trips of 1,000 apples 500 miles. You will be left with 1,000 apples and 167 miles to go (you have to leave an apple behind).
• Step three: Finally, you travel the last 167 miles with one load of 1,000 apples and are left with 833 apples in Bananaville.

Want to read more on the different systems in our brain? Read Thinking, fast and slow by Daniel Kahneman. An easy to read book on the mechanisms behind reasoning and thinking.