A certain type of employee seems to appear in every company. These are the people who never seem to meet deadlines, who always have to be pushed to get their work done, who make the same mistakes over and over again, who don’t seem to do much on their own, and who never seem to try very hard.
At some point, it seems, every manager has decided, “Well, this employee just isn’t performing,” and sometimes, they may well be right. This begs the question, though: How much of this poor performance was actually caused by the manager?
This has the potential to be a wildly uncomfortable question, since managers are, by definition, responsible for judging performance. They set standards, determine who is doing the best and worst jobs, decide who gets promoted and who gets fired. They evaluate and judge. They decide what’s acceptable and what isn’t.
Yet here’s the thing: management comes before performance.
Managers decide what’s important, what gets done and what doesn’t, what gets approved and what gets dismissed, what gets rewarded and what gets punished. Managers decide how much autonomy employees have, how much freedom they have, how much leeway is allowed, how quickly problems are solved, and how much employees understand what they’re supposed to be doing.
In short, managers don’t just evaluate performance; they have tremendous influence over it. They may be standing in the control room, but they’re also often the ones pushing all the buttons.
The Employee & Manager Slices of the Problem Pie
A 2024 NBER study sought to identify the causal effect of managers on their teams’ performance.
The paper’s authors experimented with repeated reallocations of managers, controlling for differences in the skill sets of the teams. The purpose of the experiment was to quantify the effect of a simple managerial change, and the results were astounding.
The study found that good managers improved their teams’ performance by approximately double the number of “good workers” would have. The paper uses the phrase “good manager” to denote someone who consistently drove better-than-expected results from their team.
N.B.: The cited results do not mean managers are twice as productive as employees. Far from it – both the phrasing and the findings suggest the opposite.
The findings suggest that if you hire a good manager, you cannot simply lay off half your staff in favour of the manager and expect double the performance. Neither do they suggest that employees are fungible or that an outstanding manager would be able to extract twice the performance from any arbitrary set of subordinates.
What the study does suggest is that the people managing your team can affect your team’s performance by a surprisingly wide margin. It suggests that both your employees and your managers matter, and that the combination of the two matters even more.
Another NBER study of transfers between stores in two large retail chains found that, given the consistency of management practices across the businesses, studying how individual managers affected the performance of their new teams gave a less distorted view of the contribution to productivity that a manager can reasonably be expected to provide.
Both these studies suggest not that employees are unimportant, but that “the team is underperforming” is a dangerously incomplete diagnosis. Your team may be underperforming because your employees lack the experience, skill, or commitment to do the job well. It may be that your employees are entirely appropriate for the task, but they are, in fact, being managed poorly – either at the level of individual contributors or individual executives. It may also be that your employees are being managed by an ineffective manager, an ineffective system, or a combination of the two.
Consider the following scenario:
Your manager changed your team’s priorities on Monday.
You spent all of Tuesday prioritizing the newly prioritized project.
On Wednesday, an emergency cropped up, and you had to change priorities again.
On Thursday, your manager asked you why the first project wasn’t getting done.
On Friday, you found out the delivery date for the first project had slipped because of something that happened in another department.
When you go into your performance review, your manager tells you that you need to be more organized, take more ownership, and all the usuals. Maybe you do need to be more organized, but have you considered that it may not be your responsibility to rearrange your entire workload when priorities change?
This is why management should not be considered an optional part of the performance system – because it is an integral part of the performance system. It has to be. Research on role ambiguity shows that when there is insufficient clarity about what’s expected of you, your performance tends to suffer.
This does not mean that every underperforming employee is necessarily being managed badly. However, it does mean that we can no longer think of clarity of expectations as an employee competency. That kind of clarity is frequently the responsibility of managers, which, again, puts it squarely in the realm of managerial responsibility. Using this framework to understand performance issues can help you recognize some “bad” behaviours as the result of years of poor management.
An employee who is afraid to make decisions may have learned that decisions are rarely wrong.
An employee who asks permission constantly may have learned that acting without permission makes them look foolish.
An employee who is disengaged and cynical may have learned that no matter how hard they try, nothing changes.
An employee who misses priorities may have been given too many changing priorities.
An employee who always works right up to a deadline may have learned that nothing gets done before one.
An employee who can’t do anything without their manager may, in fact, have been taught that by their manager.
This brings us to one of the most damaging management practices: managerial interference.
When managers interfere with the day-to-day responsibilities of their direct reports, they train those direct reports to deal with everything at a level two steps below their actual level of responsibility. It doesn’t matter whether they are “helping,” “teaching,” “managing,” or “holdingaccountable.” Interference creates inconsistency, confusion, and the impression that the manager can’t handle anything without stepping in. Employees managed this way may always present problems at the executive level.
They may be unable to own problems or solutions.
They may always need their manager’s help or approval.
They may fear making mistakes without knowing their manager’s input.
They may have become unreasonably rigid in their approach to their responsibilities.
Micromanagement Can Manufacture the Dependence It Complains About
Micromanagement is typically defined as a practice that is detrimental to employees because it limits their freedom of action. This is partially true, but it is also a consequence of a much larger effect. Micromanagement can actually cause behavioural changes in people.
🔄 For example, suppose that you have hired a competent person to do a competent job. They make a decision you wouldn’t have made. You tell them they’re wrong. The next time they’re faced with a similar decision, they ask you what to do. You tell them, they do it, and you correct them again. The next time they’re faced with a similar decision, they ask you what to do. You tell them, they do it, and you correct them again. The next time they’re faced with a similar decision, they ask you what to do. You tell them, they do it, and you correct them again. 🔄
See where this loop is going? Eventually, they stop making decisions and simply ask you for instructions. You give them more detailed instructions. They ask you for more detailed instructions. You decide that they simply don’t have the initiative to do their job, and you start watching them more carefully.
🎉 Congratulations! You’ve just created the employee you were originally complaining about! 🎉
For those scoffing at this example, this is not just theory. A meta-study of 72 studies, 83 samples, and more than 32000 people found that employees who perceived their leaders as acting in an autonomy-supportive manner had more positive work outcomes. This includes positive associations with work performance, engagement and proactive work behaviours, and negative associations with turnover intentions.
Autonomy-supportive leadership is not being completely uninvolved. It provides freedom in action and decision-making, takes their input into account, and encourages self-initiative without hindering them, which is an extremely important difference.
Good management is not telling people to do whatever they want, or to do exactly what you would do; rather, it is telling them what you want them to accomplish and letting them do it, while intervening when they cannot accomplish their goals without assistance and helping them when they can. This results in much more competent employees, who are much less reliant on their managers.
This is especially important because a manager’s job is not to process every single decision that their employees make. If you have to answer every question they have, you’re not managing effectively, and you’ll likely end up with a queue of people waiting to hear from you, rather than competent employees who can handle most things on their own.
The irony is that managers often fall into this trap precisely because they want to be effective. They feel like they are doing their job by answering every question, but they are actually defeating their purpose.
Managers are accountable for their team’s performance, so it can be tempting to take responsibility for everything they do, but it is far more effective to let them handle things on their own and intervene only when absolutely necessary.
This is the difference between a manager who is simply a bottleneck for decision-making, and a manager who actually manages.
This is also where the myth of the manager as a performance evaluator falls apart: a manager does not simply determine whether someone can perform; they determine how much opportunity they have to perform.
That is not to say that a manager is not accountable for performance; it means that they have much less opportunity to affect performance, and much more opportunity to create poor performance by failing to provide the resources, freedom, and feedback necessary to actually perform.
If someone is consistently underperforming, even when given the resources, freedom, opportunities, and feedback they need, then they are likely to be a poor performer, but if they are not, then they may not be the problem, and it may be the system that is failing them.
Right now, ten thousand manager voices cried out in agony, objecting virulently because they are often expected to be the ones who determine whether or not someone can perform, and therefore they feel like they need to control everything in order to make that determination.
The Meaning of Management
A manager should not try to determine whether someone can perform; they should create an environment in which they can perform, then evaluate whether they are performing, rather than trying to determine whether they can perform.
This is also the point where many managers will start to see the flaws in their own management practices. The manager who is constantly changing priorities, rewarding the wrong people, avoiding difficult conversations, and putting out fires is not doing so out of malice or incompetence, but rather out of a desire to manage effectively.
They are trying to create an environment in which their employees can perform, but they are failing to do so; as a result, they constantly have to intervene to prevent employees from failing. Such a method is not an effective way to manage, and it is a sign that the manager is not administering matters effectively.
It is important to remember that management is a process, and that there are many different ways to achieve its goals. Some managers are better at it than others, and some managers are simply better at certain aspects of it than others.
However, there are some fundamental principles that all managers should follow, and one of them is providing their employees with the freedom of action and decision-making, taking their input into account, and encouraging self-initiative, while not hindering them.
The Behaviours You Reward Become the Behaviours You Get
One of the easiest ways for a manager to destroy performance is to reward the wrong thing, and this is rarely because they are evil. They are usually just rewarding the most obvious things.
Someone stayed up late to finish a project – that’s dedication. 10 points for Gryffindor!
Someone dropped everything at 7 pm to help out with an urgent customer problem – that’s heroism. 20 points for Gryffindor!
Someone responds to my Slack messages within 30 seconds – they are committed. 30 points for Gryffindor!
Someone worked over the weekend to meet a deadline – let’s give them a round of applause. 40 points for Gryffindor!
Meanwhile, someone quietly fixed the processes that would have stopped the weekend crisis from happening in the first place, but they have gone unnoticed. No points for Ravenclaw!
Alas, that is how companies end up rewarding people for making fires rather than putting them out.
One of the most interesting things about organizational performance is that the market value of various workplace behaviours often bears little relation to what the company says it values.
A company can say that it values planning, quality and sustainable performance, but if the people being promoted are the ones who work the longest hours and save the day at the last minute, the rest of the company will quickly learn that last-minute heroics are the most important thing. They are not dim in any way whatsoever; they simply observe their colleagues’ behaviours and learn from them.
A manager’s actions are effectively a set of behavioural coaching cues for the whole team.
If you reward people for being available to your team at all times, you can expect availability to become a key performance indicator.
If you reward speed of response regardless of errors, you’ll get speed of response.
If you reward people for taking all decisions up the chain of command, you’ll get a company that cannot make decisions.
If you reward people for preventing problems, you’ll get people who prevent problems.
If you reward people for being “a bit of a pain but getting things done”, you’ll get people who get things done but are “a bit of a pain”.
That is why recognition is such a powerful tool. Beyond making people feel good, it sends market-value signals to the team about what is and isn’t important.
Studies on management practices have found that goals, monitoring and feedback can have a major impact on productivity. In field experiments on airline captains, management practices such as performance monitoring, feedback, target-setting and prosocial incentives all led to significant improvements in targeted fuel-saving behaviours and, in some cases, increases in overall job satisfaction.
Now, this does not mean that managers should monitor everything. That would simply proliferate the very thing we want to see less of. What it does mean is that monitoring is part of the feedback loop. What you measure, discuss, and reward affects performance. So does what you allow to continue without correction, and most importantly, what you repeatedly rescue.
If a manager has a team that misses every deadline and responds to every problem by throwing the manager into the fray to “sort it out”, they should ask themselves what they have taught the team. They may believe they have taught the team to do better, but the team has actually learned that the manager will always rescue them when things go wrong. They learn to avoid responsibility and expect the manager to take over when things get tough. Meanwhile, the manager learns that the best way to deal with recurring problems is to rescue people rather than fix systems.
They have all been conditioned to act that way, without anyone intending to, and that is one of the fundamental problems with management.
Managers are powerful role models, and everything they do sends behavioural signals to the team. When it comes to busyness, managers don’t have to tell people to work long hours; they model it.
If they work 12-hour days, people will notice.
They will also notice if someone leaves at 5 pm every day and quietly works from home in the evenings.
They will notice if someone is praised for working 80-hour weeks and taking no breaks.
They will notice if working from home is seen as a perk and taking holidays is presented as selfish.
They will all learn different lessons about busyness and productivity, adjusting their actions and becoming incredibly busy without actually doing much useful work.
The difference between busyness and productivity is often invisible to the people involved.
Preventing problems before they occur rarely seems as important as putting out fires.
Processes and procedures are often seen as less exciting than dramatic actions.
Careful decision-making seems less impressive than “thinking on your feet”.
A team that learns to solve its own problems without constantly escalating them to the manager will make the manager feel less important.
It can make the manager feel redundant, which is why effective managers often feel their contributions are less valued by executives than they should be. They are busy people, making important decisions, solving problems, and rescuing the company from disasters, but those actions do not have the same impact on the bottom line as preventing those disasters from happening in the first place.
That is the real value of a good manager: they make the company less reliant on them, which makes the company more successful. It also makes the manager less valued by the people at the top.
Avoiding Problems Doesn’t Keep the Peace – It Changes the Team
There is a certain kind of management mistake that feels reasonable in the moment:
There is a certain employee who doesn’t perform.
You think to yourself, “Well, I’ll give them a little time. Maybe they are just having a rough week. I’ll bring it up at their next review. It’s probably not worth creating a scene over.“
A year later, everyone except the person in charge understands that the employee isn’t performing, but no one has addressed it because, really…who has the time?
This mistake is often called avoidance, but it can also be seen as a type of management decision. You’re deciding that this behavior is acceptable, and the rest of your team sees it. You should care because if they are not performing, it impacts the performance of others. It affects your own performance and your team’s culture.
A team’s culture is not defined by the individuals that make it up, but by the standards they share. People look around and think about what it means to be a good member of their team. What does it mean to miss a deadline, to be rude to a coworker, to be chronically underperforming, to do consistently incredible work?
Answers to these questions aren’t written anywhere, but they can be found in managers’ actions. If you tolerate one employee who routinely misses deadlines, conscientious employees will start to ask themselves why they are putting in extra effort. They might not think, “Oh, I’m so glad that [slacker] has more flexibility with their schedule,” but they might think, “Maybe I’m working too hard.” This is an example of a single performance issue affecting others’ performance.
Such instances are why it’s not that difficult actually to have a good conversation and why such conversations should be actively encouraged. A good manager does not have to enjoy difficult conversations, but they should be willing to have them. You don’t have to shame employees or turn every minor performance issue into a morality play, but you should be willing to address issues clearly and directly. You should hold people to standards, because they hold you to standards.
The research on manager-employee relationships also points to the importance of strong working relationships. In particular, a huge meta-analysis on Leader-Member Exchange Theory highlights the value of positive, supportive relationships between managers and employees. Trust, empowerment, and motivation all lead to positive behaviours like increased performance and citizenship behaviours.
This isn’t suggesting that managers should be best friends with their reports, but it does highlight the importance of working relationships. You can’t have trust without mutual respect and the feeling that each party is acting in good faith. That applies to both sides of the relationship. Employees have to trust that their manager will support them, but managers also have to trust that their employee will deliver. Neither side gets to demand loyalty or goodwill from the other. They have to earn it by showing up reliably and doing the right thing.
That’s why inconsistent standards from one employee to the next are so corrosive.
If you promise flexibility to one person because you like them, but deny the same flexibility to another employee who asked, you create distrust on your team.
If you hold one person to consistently lower standards than everyone else, you’re creating similar distrust.
If you tell people that the priorities are one thing, but you change them when it’s convenient for whoever is asking, you’re creating a toxic workplace.
It’s easy to dismiss these issues as unfair, but they shouldn’t be dismissed as unimportant. They effectively erode the trust between manager and employee, and once that trust is gone, you can lose your ability to manage effectively.
Management has a responsibility to set standards. If you’re not enforcing standards, it becomes much harder to enforce standards later. It’s one reason why management is so much harder than employees think.
You aren’t walking into a clean slate each morning. You are always working with an existing culture that you help shape, and that helps shape you.
You can make it easier or harder depending on the decisions you make.
You can make problems more visible or more hidden.
You can make employees self-thinking or dependent on you.
You can make excellent performance commonplace, or you can make extraordinary acts the norm.
Then, after all is done, when you get caught in the middle of it all, you can think, “Why is my team underperforming?“
Who knows, maybe you’re right, but maybe you’re not. They might be underperforming, but it might stem from a source or reason where they are giving you honest feedback on your management system.
So, if you’re thinking about firing them, consider whether firing them would actually solve the problem.
Final Thoughts
Sometimes the issue really is the person. Some people are just slovenly, consistently underperforming, and then failing to meet expectations despite your help, guidance, opportunity, and clear communication.
Managers aren’t superheroes, and your employees are adults. However, managers bear responsibility for the conditions in which their people work.
Before moving on to judgment, consider asking yourself a few tough questions:
Were expectations clear?
Did your reports have the information, authority, and resources they needed to fulfill the requirements of the position?
Did you address issues before they became problems?
Did you allow failures to dominate conversations, or withhold feedback and opportunities for advancement?
Did you fail to delegate, and take over tasks that were rightfully the responsibility of your people?
Would this person be a different performer under a different manager?
This is not an indictment, but an assessment, since research on managerial impact shows a clear conclusion: managers are often powerful predictors of the performance of the people they lead.
So when we find ourselves thinking about firing one of our reports, it’s worth remembering that we may not have maximized the conditions for their success to begin with.
This is not to suggest that we can turn poor performers into strong ones by simply changing their managers or through sheer willpower. Nor is anyone arguing that the solution to every personnel problem is to replace the manager. What matters for memory is that people are often products of their circumstances.
This reframes the conversation from “how do I get more out of these people?” to “what is getting in the way of their success?“
Maybe the issue is unclear priorities.
Perchance the real root problem is an unhealthy dependency on approvals.
Perhaps your people have been rewarded for putting out fires, and are consequently avoiding the larger issues.
Mayhaps conversations are consistently put off until after months of mounting tension.
Possibly you’re not delegating enough and are always solving problems for people who need to learn how to handle them on their own.
These are the sorts of things good management can address: removing roadblocks and creating conditions for success.
The most effective managers aren’t the ones who provide the most resources or information, but the ones who create an environment where their people feel empowered and supported. They promote autonomy, mastery, a sense of purpose, and belonging.
To the untrained eye, the result may often look like the manager isn’t doing much of anything at all. When done well, management is a gruelingly difficult job that is completely invisible, because their role is to ensure everyone else’s role runs smoothly. When done correctly, management creates the conditions for performance rather than extracting performance through brute force of will.
Often the most important questions aren’t about who is to blame for poor performance, but about who is most responsible for improvement. That doesn’t always make it the manager’s fault, but it does mean there’s always a right answer.
The Myth: Feedback Automatically Improves Performance
We’ve been told for decades that feedback is an agent for improved performance. If that were true, annual reviews would produce high-performing teams, generic comments would influence behaviour, and being told you “need to do more communication” would make you communicate better.
None of that has been shown thus far to work in any capacity. Furthermore, organizations don’t appear to be starved for feedback. In most, performance reviews happen annually, managers talk to people one-on-one regularly, there are post-project discussions, and feedback is “offered” in casual conversations. Employees continue to rack up “satisfactory” performances with write-ups, and employees’ careers are littered with commentary in the vein of “needs development in A, B, and C,” yet continue to repeat their same errors and get stuck in the same traps. The issue stems from the inability to give people the kind of feedback they might be receptive to.
This in particular is a really crucial distinction: feedback, on its lonesome, is just information.
Information becomes development in four areas:
Understanding
Acceptance
Retention and Translation to Behaviour
Action
Fail any of these four, and feedback may have been delivered, but it hasn’t been useful. This is where a deeply cherished organizational myth crumbles. So many leaders believe that they have “delivered the feedback” and thus have “done” the change development side themselves; the remainder is up to the employee.
Research clearly shows it does not work that way. In 1996, research conducted by Avraham Kluger and Angelo DeNisi undertook a meta-analysis of hundreds of studies of feedback interventions. While many feedback interventions were helpful, the research found that nearly a third of feedback interventions actually caused people to do worse.
This then begs the question: if feedback was so good for people’s performance, why would it be negative one-third of the time?
Such a realization clarifies why simply giving feedback isn’t the issue; rather, it’s the quality of that feedback across these different areas, as only good feedback develops behaviours.
Why Most Feedback Fails to Improve Performance
Unfortunately, most workplace feedback is not very useful. If you’re in a managerial position, think about what your employees hear every day:
“You need to be more strategic.”
“Improve your communication skills.”
“Take more ownership.”
“That didn’t turn out well.”
On the surface, these are all well-intentioned pieces of feedback. They acknowledge that something needs to change, but they don’t answer the most important question:
What, precisely, do I need to do differently?
Without this question, feedback is mere judgment and becomes an exercise in frustration. Imagine telling a person to “do a better job of taking care of their health.” Should they get more sleep? Exercise? Eat differently? Reduce stress? Drink more water?
The advice is not wrong; it is simply so broad that it is impossible to act on and will just be taken as something given in bad faith.
The same is true of workplace feedback. Telling your employee to “communicate better” leaves them with no direction on what behaviour to modify, when & how it needs to change, and how success will be assessed. Employees typically end such meetings knowing they didn’t meet expectations, but still unclear on what “different” looks like.
Clarity gives people confidence while vagueness makes them hesitate, and hesitation has a cost.
Employees unable to see what “good” is may second-guess their decisions, delay taking action, become silent rather than speak up, or fall back on familiar work patterns rather than try something new. We thus run into this weird scenario where the goal of feedback-to-performance-improvement can actually decrease this ratio.
Timing causes another major problem.
The annual or semi-annual performance review is the norm in many organizations. By the time the manager and employee gather to discuss an employee’s work, the events in question may have transpired months earlier.
Human brains are not wired to learn from events distant in the past; details, along with context, are lost, and emotions often overlay objective observation. Instead of an opportunity for improvement, the performance review turns into a historical document, and changing one’s behaviour yesterday is impossible. The more employees can effectively influence their behaviour tomorrow, the higher the quality of their outcomes will be. That is why organizations around the world are shifting from treating feedback as an event to treating it as a process.
Gallup, for example, asserts that feedback has an expiration date: the closer it comes to the event it is about, the more helpful and actionable it is. Employees who receive frequent meaningful feedback are significantly more engaged than those who receive it only once a year.
Sense & Direction – another common mistake involves turning feedback into a one-way street.
The manager delivers the feedback, the employee receives it, neither party is certain whether they understood each other, and the meeting ends.
As it should be obvious, learning doesn’t tend to work this way. Employees have to ask questions, be sure expectations are clear, reflect on their own point of view, and discuss the desired results; otherwise, assumptions, not clarity, will prevail.
Emotion (or lack thereof).
Nobody likes to feel that they have done something wrong. When feedback intended to encourage development is interpreted as evidence of incompetence, recipients’ defenses go up. People are more likely to work on solutions when they are not afraid of being judged by their manager. Ultimately, the purpose of feedback is to help the person grow, not to prove the manager was right.
Moving beyond evaluation and toward development is the first step in feedback, and, ironically, one factor has proven more valuable than anything else: stop thinking about the past and begin planning for the future.
The Science Behind Feedback That Actually Works
If bad feedback does not lead to performance improvement, the immediate thought is, what does?
As shocking as this may be to some readers, the answer is not, in fact, “more feedback.”
What happens in a lot of instances is that companies, when bad feedback doesn’t produce positive results in the organization, try giving more feedback, more feedback check-ins, reviews, or telling people the managers should provide feedback more regularly.
Although this would naturally spring up from good intention, more feedback won’t do any good as the problem isn’t frequency. Bad feedback is still bad feedback, however much you try and disguise it or apply layers of make-up over it. The crux of the problem lies in how we conduct a feedback conversation.
One of the very fascinating results of the studies being carried out into feedback research is that conversations that deal with past activities may result in managers obtaining just the reverse result. The objective of the discussion about a failed outcome seems to be to identify what exactly the problem was, to address why the results of a certain output did not quite match the standards, and to allocate blame.
So, if it is to make us understand the exact reasons behind a specific issue, it is surely easier to avoid its repetition? Well, most of the time it isn’t so.
Research conducted in 2020 found that conversations that focus solely on addressing the output from the previous stage can cause issues between a manager and employee regarding why it is likely not up to the mark. Quite contrary to creating a shared mindset, it becomes an act of making the employees defenseless towards their conduct and a tendency to self-assess the positive sides and look for external explanations for failure, increasing this discrepancy in their minds, which leads them to accept less and be less likely to adopt the feedback given to them.
If we want to have a better grasp of such findings, we need to ask ourselves: how do performance review meetings start most of the time?Do any of these lines sound familiar?
“Let us discuss this past performance and rectify the shortcomings.”
“Why was this project a failure?”
“Explain to me why you were not up to par with your deliverables.”
“What could you have done differently to achieve better results?”
“Can you explain why your performance did not meet expectations?”
“Let’s go over the areas where you fell short and discuss how to improve.”
Even though these are not bad questions, they place the focus of attention on proving oneself, not on learning in context. Once one starts doing that, they can only move their focus from learning towards showing themselves to others; in proving that they are competent or to explain their actions. After all, that’s the way one’s brain is formed.
The interesting thing, though, from this research is that managers do not need to withdraw this kind of feedback completely, but rather should aim to move their focus to discussions of the subject matter & its progress. What mostly determines whether employees accept and intend to change through a feedback process is a forward-focused discussion.
When an employee feels that a feedback discussion about their performance pertains to the future course rather than past failures, they become more receptive (also, this encourages the employee’s intention to implement the changes). So the subtle alteration could have immense significance.
To better illustrate this, ponder upon the following options:
“Your presentation lacked engagement, and the audience became unenthusiastic.“
Vs
“What steps can we take to enhance the presentation to fully capture the attention of the audience right till the end of the presentation?”
Whereas the previous sentence will attempt evaluation, the other one, in contrast, would be development. One is backward-leaning, whereas the other is forward-facing. The one that is toward a bright future focuses the discussion on the future, not only on issues or deficiencies of the past.
The reason many leaders emphasize the need for managers to become coaches is that coaches develop and coach people. Managers, rather than just criticizing a situation, can ask the following questions: “What is the thing that we learned here?“, “What will we try this time round differently?“, “Is there any assistance or resource required to have an impact this time?“, “How can we make our future attempt a successful one?”
Effective Feedback Is About Behaviour, Not Personality
What’s another key element common to all great feedback?
It addresses observable behaviours, not a person’s inner traits.
That may sound obvious enough that you wonder if we need to say it out loud, but the two often get tangled into one in the real world. Here are a few examples:
“You aren’t a great communicator.”
“You’re disorganized.”
“You don’t take ownership.”
The problem is you’ve now just defined who the person is, what their traits are, which are often deeply ingrained or even impossible to alter in real time. Think about trying to tell someone they “aren’t” good at communication; how would you even begin to prove that statement wrong? How can you work on what such a statement wants from you?
Now let’s think about how such assertions could be changed:
“During today’s client meeting, several key questions weren’t addressed before moving to a decision. Next time, I’d like you to pause and invite additional perspectives before wrapping up.”
“The report was submitted two days after the agreed-upon deadline. Let’s take a look at what might have been standing in your way and figure out what we can do differently for the next project.”
Actual change occurs when we use the right words and the right amount of words, to boot. Using both the right words and the proper amount requires going in-depth and pinpointing particulars. When we do that, you’re going to want to pinpoint things that can actually be changed, because behaviour is observable, measurable, replicable, and above all else, changeable.
Personality isn’t what needs improving – performance is. In other words, great feedback doesn’t make judgments about character or intent; instead, it describes what they did, explains why it mattered, and offers suggestions for what to do next & how to achieve it.
No employee should leave a performance discussion feeling unsure if they can even do their job. They should walk away with a clear understanding of exactly what success looks like the next time around. This is the key difference between criticism and coaching, and the key reason why the most effective feedback possesses characteristics that elevate it far beyond simply being “honest.“
Five Characteristics of Effective Feedback
Hopefully by now you’re noticing one thing fairly plainly: feedback isn’t so much about constructive versus damaging feedback. That is nonetheless a relevant difference and an important one to keep in mind, but feedback, what it should be at its core, means facilitating higher conduct from others.
However, if that is the case, we then have to think about another aspect: what makes one bit of feedback more likely to be seen and acted upon as an alternative, rather than met with quiet resentment and forgetfulness?
Though the precise context in every workplace may differ, researchers agree there are five elements more likely to have success.
1. It’s Timely
Feedback is time-sensitive.
The longer a manager waits to engage on a particular topic, the less valuable that conversation becomes. Details and context are lost, and both parties have to recall facts relying on hazy memory. As a coach, would you wait until the end of the season to give one piece of advice on positioning to one player? As a drama teacher, would you wait until a child’s annual recital to mention a few words of advice for playing correctly?
While these examples seem silly, there is a grain of truth there: we don’t learn that way.
Small adjustments in experience improve performance the most effectively when they occur as experience is unfolding. In light of this, some of the best-performing organizations have increasingly embraced the notion of “ongoing” rather than “formal” feedback practices.
They have shifted from the expectation that feedback primarily occurs in quarterly, bi-annual, and annual reviews to encouraging short check-ins on a daily and weekly basis. A five-minute chat between a team leader and report following an interaction with a client, a project kickoff, or the completion of a key milestone often adds far more value than a lengthy review two months later.
To this, we should mention an added benefit of timely feedback: it has an effect beyond improving recall – it impacts momentum too.
2. It’s Specific
One of the quickest ways to make feedback useless is to keep it too vague. Statements such as “You need to work on your communication” or “Be more proactive” may seem like they convey information but are highly unlikely to provide an employee with the specific behaviour they need to adjust.
Specific feedback defines behaviours that are observable and concrete. Instead of saying,”Your communication could use some work,” you can rephrase it in a manner that actually carries realistic improvement capability:
“In today’s client meeting, you did an excellent job answering their specific questions. However, you moved to a decision without asking for other stakeholders’ input, and a few people left the meeting with unanswered questions. In future meetings, be sure to pause after asking a question and wait for other people’s questions before making a final decision.“
Now the employee has a clear understanding of what the problem was, why it was a problem, what success looks like, and how they can achieve it. The guesswork is all but removed.
3. It’s Actionable
Identifying a problem doesn’t mean solving a problem. If it worked like that, snipers would make the best doctors.
Think about a personal trainer telling a new client, “You should get in better shape.” This is little more than a truism. Good trainers tell us what exercises to do, when to practice, how often, and what to track over a period of time. The same applies at work, where great feedback will answer the question ”What next?”
It should be noted that this kind of change might involve experimenting with how you run meetings, plan a presentation, ask questions during client discussions, or break projects down into smaller stages.
4. It’s Psychologically Safe
The trick to good feedback is the existence of psychological safety – a space in which feedback can exist without its recipients feeling mortified, culpable, or punitively chastised; if people are convinced that errors are equivalent to accusation or punishment, they will inevitably be either cautious or deceptive.
The key is a framework that does not reduce standards, nor obviate the necessity of conflict (conflict IS good when one understands how & why). It is a framework that signals the desire to develop through the feedback exchange, and in determining this climate, managers are critical.
By their very nature, curiosity offers a better way to communicate than accusation; questions teach more than assumptions; and listening matters more than lecturing. Furthermore, feedback is more effective when recipients believe the purpose is to develop, not to disgrace, so the intention is to learn when the feedback is intended to help you succeed, not to catch you out making mistakes.
5. It’s Future-Focused
As we’ve iterated a few times in this article, effective feedback enables forward progress. You may remember how past failures often create more than one story about why they happened. These can turn a conversation into an argument that quickly spins into finger-pointing and defensiveness, rather than learning.
A future-focused discussion shifts the entire goal.
Instead of asking: “Why did you do that?”
Ask: “What will you do differently next time?”
Instead of saying: “That strategy failed clearly.”
Ask: “How can we approach the next project to achieve a different result?“
This is a much softer approach that moves the conversation from “who” to “what,” and avoids rewriting the past, shaping the future instead. It sets people up for future success, not failure.
Replace Performance Reviews With Performance Conversations
There’s no greater example of the distinction between providing feedback and fostering improvement than the annual performance review at work.
For decades, companies have used an annual check-in to review performance, highlight gaps, pinpoint areas for improvement, and plan for the coming year. The logic is straightforward: gather observations for an entire year, get together for one meeting to rule them all, deliver feedback, and performance improves.
It feels like magic & sorcery, almost surreal…because it is!
At the time of the meeting, events may already be months old, and employees likely don’t recall the circumstances surrounding it. Managers may bring up very recent issues and ignore the whole year’s data. Both parties struggle to draw insights out of situations that have already passed and cannot be changed. Far too often, however, employees anticipate these conversations and prepare to endure them, rather than get anything valuable out of them.
Now compare that to organizations that weave feedback into their daily work. Here, instead of a single meeting a year, managers coach employees on an ongoing basis:
They praise positive performance as it is happening
Make corrections to minor habits before they become significant issues
Provide employees with opportunities to reflect and learn from their experiences
Embed feedback as an integral part of how the team gets things done, not an event that interrupts it.
Now, this is not to say that organizations should eliminate performance reviews wholesale. They do serve important purposes as documentation of employee achievement, conversation points for career growth, and discussions to align expectations and support administrative decisions.
The review, however, should not be the key mechanism for employee development. Instead, true growth occurs through the many minor interactions between formal performance evaluations. The most effective managers don’t merely review work – they actively contribute to its shape.
Final Thoughts
Feedback Doesn’t Change People ➔ Better Conversations Do
Giving feedback is just the first step in a long series up the stairs of improvement.
The real performance increase comes from the next steps.
Did you tell someone their feedback while the context was still clear?
Did you focus on specific behaviour rather than personality judgment?
Did you give the other person something specific they could do to improve?
Did you create a psychologically safe space for conversation?
Did you help the person understand what success actually looks like for them next time around?
If the answer to any of these questions is no then your feedback will not translate into any lasting growth, rather just another conversation that’s lost from memory by Friday afternoon. The best leadership practices not only evaluate but build capacity in people to step up and try to deliver on something new.
Realistically speaking, most people don’t act because somebody just told them they should. Most people grow because somebody shows them how they could become better, and then supported them with the confidence required to get there.
A flashlight has a most mundane but curious property: the moment you flip the switch, the room becomes both brighter and darker. Wherever the light beam hits, details are rendered in sharp focus, and objects you hadn’t realized were there become clearly visible. At the same time, the opposite occurs everywhere: the rest of the room not illuminated by the flashlight beam falls into deeper shadow. The darkness is not a flaw of the flashlight; it is a necessary trade-off for the light it produces. The same is true of performance measurement. Each KPI illuminates one dimension of a company’s operations, whether that be revenue growth, customer satisfaction, employee productivity, inventory costs, or operational efficiency. KPIs make it easier for executives to understand, analyze, and (one hopes) improve organizations, converting complexity into data points that facilitate decisions, rather than gut feeling or anecdote alone. For decades, the standard solution has been the same: if one KPI helps uncover something important, perhaps 10 KPIs can provide a better understanding, and 100 can illuminate everything clearly. That’s the rationale behind the modern dashboard: displays of gauges and graphs, crammed with performance indicators, accompanied by meetings to debate the resulting data, all aimed at dispelling ambiguity.
For all intents and purposes, this is a completely reasonable yet equally impossible aspiration. That may sound startling given how much more access we have to data than ever before. We store it on massive servers at minimal cost. We use sophisticated analytics and AI to glean insights from terabytes of information. It seems that if we just gather enough data and track enough metrics, we should eventually be able to eliminate the shadows completely, but we never do. This isn’t because organizations aren’t diligent, or their dashboards are poorly designed, or due to management failing to pick the right KPIs. It is because measurement always has its limitations. The first step in any measurement is deciding what we want to measure, a step often so mundane that it slips below notice.
Someone first decided that customer retention was a worthwhile thing to track.
Someone first determined that employee productivity could be represented and measured in an operational way.
Someone decided to define and track inventory turnover.
While individually unremarkable, these choices coalesce to determine how an organization understands itself, and this is where a conversation about management science turns toward a more ancient philosophical inquiry: is it possible to represent all aspects of reality? As the history of thought suggests, the answer is no. All representations of something omit something from it. Every descriptive attempt leaves something else out. A given perspective must, by its very essence, exclude other perspectives. The limitation of KPIs is not that they don’t capture enough, but that they cannot capture everything simultaneously…and maybe they shouldn’t. Imagine that a cartographer were asked to draw a complete map of a country, including every road, every river, every building, every tree, every shifting cloud, and every stone on its surface. If the map were rendered with perfect accuracy down to the atomic level, it would no longer function as a map – it would be indistinguishable from the country itself. In that case, its utility would depend entirely on what it had omitted.
The Argentine author Jorge Luis Borges nailed this with his short tale “On Exactitude in Science.” The empire there had grown so hung up on perfection that the imperial cartographers had produced a map so detailed and at precisely the same scale that it mirrored the entire empire. This was an incredible (and utterly useless) feat of accuracy.
A map as large as reality provides nothing useful because it has forfeited the very abstraction that made maps useful.
Organizations seem to be striving toward the same ambition when they set out to create dashboards. Each new initiative seems to yield yet another metric. Each new blind spot feels solvable if we can just add one more indicator. Along the way, however, we realize that the dashboard has ceased to represent reality by abstracting from it and has begun to become reality itself by trying to represent every aspect of it.
Rather than helping us understand the world by reducing its complexity to a set of meaningful patterns, the dashboard simply introduces its own brand of complexity. It becomes another source competing for our attention, rather than helping to direct it. The ultimate irony, of course, is that by attempting to eliminate uncertainty, we’ve somehow succeeded in regenerating it.
Therein lies the discomfort. Performance measurement has never been about completeness. It has always been about selection. The pertinent question isn’t whether or not our dashboards contain blind spots. They always will – that is a foregone conclusion. The truly germane question is this:
On which blind spots have we collectively and knowingly chosen to focus, and what price does this quietly cost us?
Every Map Leaves Something Out
Abstraction is the very reason measurement exists.
1933: a philosopher and scientist named Alfred Korzybski made a statement that has endured as one of the most profound observations about the nature of human knowledge: “The map is not the territory.” Maps work precisely because they are incomplete.
A road map omits soil conditions.
A geological map omits speed limits.
A weather map omits property boundaries.
A subway map omits actual geographic distances.
A political map omits mountains and rivers.
None of these maps is wrong per se; they simply emphasize certain features by ignoring others. In other words, every map imposes an opportunity cost.
By helping you see one thing more clearly, it forces you, however temporarily, to stop looking at countless others. The same subtle truth underpins every single KPI we have ever created.
Imagine a manufacturing plant decides to elevate production speed to the top of its list of indicators. Almost immediately, the company begins to view itself through that lens. Conversations about throughput take center stage, and managers trumpet short cycle times. None of that is necessarily bad in itself, but the problem lies elsewhere. As the spotlight shines brighter on the speed-of-production-indicator, other valuable activities start to fall into the shadows. Craftsmanship becomes hard to recognize because it never moves at maximum velocity.
Careful experimentation with new processes is slowed by the urgency to produce.
Mentoring inexperienced workers becomes harder to justify because it doesn’t contribute directly to immediate output.
Knowledge sharing is quietly abandoned because documenting lessons learned doesn’t increase this month’s production figures.
Preventive maintenance suddenly feels like a costly delay rather than a wise investment.
None of those things become any less valuable; they just become less visible, and that is a critical distinction.
Organizations don’t typically abandon what matters because they consciously decide they don’t care about it. More often, they abandon it because attention shifts. Like a river changing its course, attention reinforces whichever pathway it flows through, gradually starving its adjacent tributaries of life. Every KPI generates the current:
Measure costs mercilessly, and resilience is slowly yielding ground to pure efficiency.
Measure speed aggressively, and craftsmanship begins to politely negotiate for a little bit of air to breathe.
Measure customer acquisition relentlessly, and customer loyalty quietly slips into the background.
Measure individual performance exclusively, and collaboration starts competing for recognition.
Measure short-term results obsessively, and long-term capability becomes an investment nobody feels they can afford.
Measure productivity and some amount of creativity has become the opportunity cost.
These aren’t implementation problems but a natural consequence of choosing one map over another. No organization, however sophisticated, escapes this inherent trade-off. The only question is whether it acknowledges it.
To believe otherwise is to believe that light can exist without shadow, or a river can flow down all of its tributaries simultaneously. Neither is possible regardless of how much wishful thinking we may engage in.
Self-reflection: What parts of your organization exist only because they were left off the map? What have your dashboards quietly trained you to stop seeing?
The Things We Know but Cannot Measure
A lot of an organization’s most significant strengths never make their way into a spreadsheet or a performance dashboard. That doesn’t mean they’re worthless. It simply means they’re unquantifiable.
There was once an old tale about a master luthier. Years ago, his apprentice learned how to master every single measurable aspect of the luthier’s art. They learned the ideal wood thickness, neck angle, and sound box dimensions. They learned precise moisture levels for every species of wood. They learned about ratios honed by centuries of master violin makers.
One afternoon, after completing their masterpiece, a violin so technically perfect that it was a work of art, the apprentice presented it to the master. The old craftsman peered at the instrument, ran his hand over its smooth, polished surface, and asked the apprentice one simple question: “Did you listen to the wood?” The apprentice stared at him, confused. He’d measured everything to a T, but he’d never thought to listen. “What does it even mean to listen to wood?”
The story may be apocryphal, but the phenomenon it describes is undeniably real. There’s a form of knowledge that cannot be expressed in mathematical equations or codified in best practices manuals. However, we can recognize it immediately when we see it, though we have difficulty pinpointing its nature.
The experienced doctor whose intuition alerts them to a problem that’s not yet showing up on the medical monitors.
The teacher who somehow senses that a perfectly attentive student with straight A’s is secretly struggling.
The firefighter who somehow knows when a building’s imminent collapse.
The negotiator who intuitively understands when utter silence will be more effective than a persuasive argument.
Ask any of these individuals how they knew, and you’re likely to get equally unsatisfying answers: “It just didn’t feel right.” / “Something was off.” / “You get a feel for it.“
From the perspective of someone seeking concrete data, these explanations can feel maddeningly elusive. Nevertheless, organizations implicitly rely on such judgment calls all day long.
For example, most of Michael Polanyi’s thought process was organized around that observation. He had the famous concept, “We know more than we can tell,” as a challenge to the notion that any valid knowledge eventually would be captured, measured, standardized, and written down. Some knowledge can easily live in a spreadsheet, yet other knowledge lives in people. They accumulate it from experience and mistakes, from gut feeling and intuition, and the kind of pattern recognition and observation which is rarely explicit enough to measure, which Polanyi referred to as tacit knowledge.
Maybe one of the best illustrations comes from something as simple as bicycle riding.
All but the most clumsy can ride a bike, hardly thinking, balancing, managing pressure and momentum, timing the minute variations in the bars, and coordinating muscles all at once. Now try asking someone to describe every single detail needed to balance, and you get a clear sense of just how much their knowledge lies beyond their words.
Knowing how differs from knowing about.Organizations have vast storehouses of this tacit knowledge:
The repair specialist who can listen to a car engine and sense what needs repair down the line.
The customer service rep who detects someone’s incipient dissatisfaction long before the complaint is lodged.
The project leader who picks up on tensions in a team meeting long before the employees are even conscious of it, or the survey forms do.
The production supervisor who notices a subtle change in a machine’s rhythm before any sensor or maintenance report flags an issue.
The sales manager who recognizes that a long-standing client is preparing to leave, not because of declining revenue, but because of a slight shift in tone during routine conversations.
All those things, those pieces of organizational know-how, don’t fit into a nicely curated dashboard, but that doesn’t make them less true. Unfortunately, just because they don’t fit, that can be an excuse to ignore them, since what can be measured tends to take precedence over what cannot.
It is here that another philosopher enters the picture, not to tell anyone how to run a meeting, but because he wrote so clearly about human thought: Nobel laureate and psychologist Daniel Kahneman, who coined the acronym:
WYSIATI –“What You See Is All There Is.”
His point was simple: human beings naturally construct stories based on the information available to them in the moment. We seldom consider what’s missing. This makes our lives easier in countless day-to-day decisions. Within organizations, it quietly sculpts our culture.
Imagine two leadership meetings.
The first features executives spending an hour analyzing revenue trends, customer acquisition costs, production efficiency, and employee utilization.
All the charts are ready. All the numbers are current.
The second meeting begins with a question that causes a flicker of discomfort: “How much institutional knowledge have we lost this year?”
Now, everyone is hushed, almost deathly silent. This is not because the question is irrelevant, but because no one has a chart tracking decades of experience retiring with long-time employees. No dashboard shows the slow erosion of mentorship. No KPI reports on the silent confidence a junior engineer accumulates watching a senior colleague solve tough problems over half a decade. Thus, the conversation inevitably circles back to the numbers, not necessarily because they are more important, but because they are present.
This is the subtle peril Kahneman described. Visibility masquerades as importance so powerfully that the longer a metric appears on a dashboard, the more likely we are to assume it deserves our attention. Soon enough, the organization behaves as though the measurable world is indistinguishable from the genuinely important world. Hardly. We don’t see trust appear on a dashboard. Nor does curiosity, judgment, wisdom, humility, psychological safety, institutional memory, craftsmanship, talent, or brilliance.
These qualities do not diminish in value because they defy quantification; they simply attract less attention, and attention (arguably more than money or time) is an organization’s most scarce resource. Consider the origin of a great river. Initially, it has countless tributaries – some narrow and tortuous, others wide and majestic. It cannot flow down all of them simultaneously, and once it commits to one path, the others quickly recede. Attention works the same way.
Every meeting agenda, every dashboard, every quarterly objective, every KPI selects one path for the organization’s energy and focus, while the rest begin to fade into the background. This is the opportunity cost of our dashboards, which we seldom discuss. When leaders choose to measure productivity, they aren’t simply choosing to observe productivity; they’re choosing to commit meetings, incentives, conversations, budgets, promotions, and intellectual energy to it.
Something else will inevitably receive less attention: maybe it’s creativity, mentoring, experimentation, or reflection. What is certain is they won’t vanish overnight, but, like an abandoned riverbed, they’ll receive a little less water each season until we eventually wonder what happened to the current. Organizations often assume culture changes because people change. In fact, culture sometimes changes simply because attention changes. The dashboard didn’t tell employees to stop mentoring one another; it simply stopped reminding them to do so. This is the quiet paradox of measurement: not that it tells us what to value, but that it gently nudges us to value what it tells us.
It is perhaps why the most enduring qualities within an organization often remain nearly invisible: the quiet conversations after meetings end, the intuitive grasp that builds over decades, the acts of kindness that, while never appearing on a quarterly report, fundamentally shape the workplace over many years.
No dashboard will ever fully capture them, and maybe it is for the better that none should ever try. After all, the purpose of a map is not to be the territory itself, but to guide our journey through it, without allowing us to forget that the territory is always infinitely richer than the paper upon which it has been sketched. Self-reflection: If your dashboard vanished tomorrow, what knowledge within your organization would still be accessible? What invaluable capabilities might have quietly receded, not for want of value, but for want of attention?
When Measuring Changes Reality
As soon as a metric becomes important, people will start to restructure their lives and their behaviour around it, and, in doing so, the organization has quietly transformed into something new.
Imagine you take a walk through a forest and carry a compass. When you are in wild country, confused as to which way to proceed, it gives you absolute assurance.
It consistently points north regardless of which direction any of the trees are oriented, and no matter how uniform all the trees look. Despite all of this, the compass does not tell you about cliffs. It says absolutely nothing to you about riverbanks or unstable ground, about poison berries or an oncoming storm. It performs perfectly for the set purpose, and it says nothing to you at all about most of the rest of the landscape.
We know that this instrument exists for the sake of asking one particular question, and not for the asking of all these questions. The problem arises when we start treating an instrument as the territory itself. It is on this basis, among others, that KPIs may have gotten themselves into trouble.
When they are first instituted, they do not, at the start, look so obviously bad as things become. What they are expected to do is help people find the way: help us see where things stand, where we are with regard to the world around us. Over time, however, they morph into something rather different.
Instead of helping people make sense of the world, they actually start to shape and create it.
What people ask no longer comes out as: “How can I do something that will help me add value over the longer term?” Instead, people begin to ask: “How can I do something to make the number for this month better?” That is not a good change at all, and neither is its effect.
This is a thought that spills over beyond the confines of business and out to the philosophers again.
German philosopher Martin Heidegger argues that technology does more than simply provide us with tools to perform useful tasks. Technology can also fundamentally change how we see the world. Heidegger’s notion of “enframing” or “Gestell” means, more simply, our tendency to see the world only in relation to how we have divided and framed it for organizing purposes.
The forest can be many things depending on how you see it:
A painter’s inspiration
An adventure park for a child
A natural ecosystem of incredible complexity to a biologist
A resource for a timber company, ripe for extraction
At its core, the forest remains unchanged. The lens through which we view it shifts.
The same phenomenon often occurs in performance management across an organization:
One manager might view an employee just as an 87% score on one dashboard.
A second manager, however, may believe this employee is the lynchpin holding a team together and should be regarded as an experienced mentor.
A third might see them as an untapped potential who will eventually revolutionize company culture.
A fourth could turn to them when a critical problem has no documented solution.
The person hasn’t altered, only their apparent visibility, and this is why the dashboards you install to “measure performance” may end up having a much more profound impact: they do not just capture a representation of an organization – they actively teach that organization what it should consider meaningful.
Take, for example, a call center team for which “Average Handle Time” is the primary KPI. At the outset, this is an appropriate metric. Nobody wants their time on hold, nor for calls to drag on indefinitely, so reduced handling times should, in principle, improve the customer experience. After a period of months and a growing emphasis on meeting the metric, you might see some subtle shifts:
Customers might find their calls cut short, and complex queries are often quickly passed on to someone else.
Calls requiring additional customer support may be concluded sooner than necessary to avoid negatively affecting the metric.
Eventually, employees might be actively encouraged to make calls as brief as possible, even when there is a clear need to spend more time with an individual. No one asked or directed the staff to stop being caring, but they learned that caring did not reflect well in the KPI. This effect isn’t isolated to call centers.
We’ve seen it time and again in organizations:
Hospitals boost patient throughput, but the time available for each patient to connect with their nurse decreases.
Universities champion graduation rates, but in practice, they have reduced the number of required in-person teaching hours to free up resources to process more students.
Software companies are on track to close out their backlog, but accumulate huge amounts of technical debt in the process, which will be handed on to someone else down the line.
Retail chains are promising ever-faster delivery times but work their warehouse employees to the point of burnout during peak periods.
Banks reduce average loan processing times, but the depth of conversations needed to truly understand a customer’s financial situation becomes increasingly rare.
Construction companies meet aggressive project deadlines, but quality inspections become compressed, allowing small defects to accumulate into larger problems later.
The KPI is a success. Reality simply adjusted to accommodate it and, in doing so, became the embodiment of Goodhart’s Law. However, this doesn’t mean people are gaming a metric. We are observing the metric changing the environment, which it was always meant to reflect.
Imagine you put a large rock in a river. ↩️
The river doesn’t stop; instead, it has to reconfigure itself around the obstruction. The water flow is altered, new streams emerge, and debris begins to accumulate in various places. The river becomes something new as a result of a piece of infrastructure that wasn’t built to redefine its flow, but that had that very effect nonetheless.
↪️ KPIs are much the same.
If you introduce a KPI within an organization, it naturally triggers a cascade of reconfigurations. Budgets change, conversation topics shift, job titles are reassessed, and career progression criteria implicitly shift as people respond to whatever behaviour is sanctioned or rewarded. None of this happens as the result of deliberate manipulation; it simply emerges from the fact that people, just like rivers, respond to their environment and incentives in quite natural ways.
Nassim Nicholas Taleb can help us understand why. His career has been dedicated to distinguishing between systems that appear efficient and those that are actually resilient.
Picture a bridge for which a designer aiming to optimize for efficiency might shed every pound of weight considered extraneous. The structure is lighter, streamlined, less costly to build, and mathematically perfect. In theory, it is nothing short of an engineering masterpiece…until an earthquake shakes its foundation or heavy traffic grinds it mercilessly. Suddenly, what was so-called “excess” turns out to be strength. It was resilience, which to an inexperienced eye looked like inefficiency.
Organizations do the same thing every single day.
A business that meticulously limits its inventory appears brilliantly efficient-until supply chain networks fail.
A company paring down its staff to achieve peak productivity appears financially responsible until demand surges, and there’s no one around to respond.
A factory delaying routine maintenance to keep machinery humming may look great on utilization metrics-until an easily avoidable mechanical failure brings everything to a standstill.
An organization minimizing cybersecurity spending appears fiscally disciplined until a single breach costs more than years of preventive investment.
Every optimization quietly borrows against resilience, and every optimization comes with a price tag paid in foregone opportunities. The problem is that resilience is silent until it is needed. It’s like the unseen roots of a wise old tree, readily ignored as long as the wind doesn’t howl, yet absolutely essential once it does.
Perhaps this is why we so often hail visible efficiency while neglecting invisible capability.
Resilience is expensive, slack is wasteful, redundancy feels inefficient, curiosity feels unproductive, reflection is just a delay, until uncertainty strikes and the very things we criticized for slowing down progress become the reason progress remains possible.
This isn’t a case against optimization; it is rather an argument against ignoring its cost. Every optimization narrows the river, forsaking countless tributaries. Every intensification of a beam of light plunges another part of the field into shadow. The practice of leadership is therefore not merely about pursuing improved performance against metrics. It is about the disciplined recall of all that this pursuit inadvertently leaves in the shadows.
Self-reflection: If the uncertainty we know is lurking should arrive tomorrow, what might your dashboard wish it had kept safe? What unseen resilience has it already surrendered in favour of something far more tangible?
The Blind Spots We Choose
Leadership is not about the search for perfection or visibility. It is the wisdom to choose which shadows you can live with.
If there is one temptation that has been with us in every civilization, in every scientific breakthrough, it is the notion that the next tool will at last allow us to see it all: a better telescope, a more detailed microscope, a faster computer, a larger database, a smarter algorithm, a more inclusive dashboard. With each passing generation comes this same silent belief: this time, maybe this time, the blind spots will be gone. Inevitably, history shows a different pattern. Every innovation expands our view only to make evident what we had not yet seen.
The telescope opened the sky only to reveal a far larger universe than we had ever imagined.
The microscope unveiled worlds unseen, only to reveal how much more complex life was than we had ever known.
The process of discovery is the same again and again. The more we illuminate, the more we realize what remains to be illuminated, and businesses are no different when it comes to this topic.
Every metric answers a question but raises ten more. Every dashboard reduces uncertainty in one area while allowing for endless uncertainty to persist elsewhere. The goal, then, was never to create a dashboard that had no blind spots (Borges’ perfect map). The goal, instead, was something far humbler & more valuable: to understand what blind spots we have accepted.
Herbert Simon offers another key insight here. He famously noted: “A wealth of information creates a poverty of attention.”
Businesses today, almost without exception, do not lack information. Quite the contrary, they have way too much of it. Every department, every software system, every meeting, every team, every person – everyonepours information ceaselessly, splitting attention like atoms.
Yet, attention is a very limited resource; like sunlight, it brightens the spots where it lands but does little elsewhere.
Every meeting on one topic takes time that might otherwise have been devoted to another.
Every incentive reinforces one behaviour and subtly undermines another.
Every promotion tells employees (intentionally or unintentionally) what is valued.
Every promotion carries an opportunity cost, just as surely as a cash purchase.
It may also explain how an organization seems to lose characteristics it never deliberately gave up:
Curiosity gives way to Conviction ➔ Thought becomes Action ➔ Action becomes the new Thought ➔ Reflection cedes to Urgency ➔ Long-term Thinking collapses under the weight of Quarterly Performance Reviews.
No one sets out to make a career of being certain or impatient. The river simply shifts its course: a bit more attention to one side, a bit less to the other, and so it continues, day by day, until the landscape has changed beyond recognition. That may be the paradox of measurement.
When we measure, people move in the direction we point the lens. They engage with what is presented in meetings and what leaders routinely ask about. Everything else slowly slips out of view, not for lack of value, but because it has fallen out of organizational focus.
Thus, we arrive at the point that measurement always requires humility. Humility reminds us that no dashboard, however powerful, is the absolute truth of the world. Every measure is a perspective, and every perspective is incomplete. The question is not to eliminate our blind spots, but to come back to them again and again and ask:
What have we stopped noticing?
What assumptions have become so deeply embedded that they no longer warrant questioning?
What capabilities have we quietly allowed to atrophy because they didn’t make their way into a report?
These questions are important because organizations are dynamic systems in constant flux.
There’s a famous observation attributed to the ancient philosopher Heraclitus: “No one steps into the same river twice.”
The person has not changed, but the river has moved on. An organization is similar in this regard: it itself might not have changed, but the markets it operates in, the customers it serves, the technology it uses, and the culture it promotes have changed.
Even if a KPI reads the same numerically, the underlying reality it represents may have morphed beneath the surface. An 85% customer satisfaction rating now may not reflect the same customer expectations as five years ago. A current employee engagement survey, using the same wording as previous surveys, may be interpreting an evolving sense of what meaningful work means today.
The numbers endure, but their meaning shifts, which is why our dashboards can never be sacred. The minute we cease to scrutinize our metrics, we cease to scrutinize the reality they represent. It may be that the best leaders aren’t the ones with the most sophisticated dashboards or who track the most metrics. Maybe the best leaders are those who:
Never mistake the map for the territory
Remember that each illuminated beam also casts a shadow
Know that every river in the organization might have flowed somewhere else
Have the insight to put down the dashboard now and again, and wonder what it cannot show us
Final Thoughts
Learning to Respect the Shadows
Every photographer chooses a frame. Every sculptor removes stone to reveal a statue. Every author leaves unwritten pages behind. Every traveler follows one road while countless others disappear beyond the horizon. Every act of creation is also an act of exclusion. Every KPI is a decision about what deserves to be seen. Every dashboard is a statement about what an organization believes is worth discussing. Every target shapes behaviour long before it records it. Every number carries an opportunity cost that cannot be eliminated, only accepted. The problem has never been the existence of these tools, but more so forgetting that they are tools in the first place. A map is invaluable precisely because it is not the territory. A flashlight is useful precisely because we understand it cannot illuminate the entire room. Likewise, a KPI is powerful precisely because it simplifies reality enough for us to act, yet that simplification comes at a great cost:
It purchases clarity with incompleteness
It exchanges breadth for focus
It gains certainty by accepting blindness elsewhere
This is the opportunity cost of knowledge itself.
Therefore, we can infer that the purpose of performance management is neither to eliminate uncertainty nor to measure everything that matters, but to consciously and deliberately choose where we wish to shine the light, and to remember that, somewhere just beyond its edge, the rest of reality patiently waits in the shadows.
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Looking to strengthen your expertise in KPI design and performance measurement? Gain practical knowledge, proven methodologies, and globally recognized certification through The KPI Institute’s Online Certified KPI Professional.
Modern organizations are obsessed with measurement. Pop into virtually any executive meeting, and you’re likely to find glowing dashboards, reports, infographics, charts, and scorecards packed with performance metrics.
Revenue growth, customer satisfaction, engagement, productivity, utilization, retention, cycle time: if it can be quantified, it’s probably being tracked.
This is the Official Market, or what organizations buy and sell in an attempt to take the inherent complexity of business and turn it into something understandable: reports, scorecards, dashboards, intelligence platforms, and Balanced Scorecards.
Business needs complexity to transform into something manageable. Leadership must see into what happens everywhere in the organization, and metrics give teams a common language to express how they perform. Formal metrics are the right tool for holding employees accountable and for allowing leaders to assess the performance of individuals or teams against others over time.
Yet the potential harms of overreliance on formal measurement systems aren’t merely abstract or as far-fetched as many make them out to be.
Natlia Cuguer-Escofet, a researcher at the University of Pompeu Fabra, and Josep M. Rosanas at Universitat de Barcelona analyzed a set of cases in which performance management systems, when implemented rigidly, led to unintended outcomes, including cases from Spanish banks in the period leading up to the 2008 crisis.
In one such instance, a manager who was resistant to escalating loan-making practices was moved out of a position where loan decisions could be made, despite being given a promotion (in the form of an increased salary and improved office space).
In another instance, a board member who was hesitant about an asset’s value was reluctant to express his reservations because the organization’s incentive systems largely tied everyone’s performance to profit. The performance systems were working as they were designed to, but their output was discouraging decision-makers from making professional decisions when they were most needed.
The takeaway from these scenarios isn’t that measurement is itself flawed; it’s that every organization’s performance system will eventually hit a ceiling where it can’t foresee every contingency. When they become overly committed to using objective indicators, organizations risk inhibiting the human intelligence that might warn them of a problem before it shows up in the results.
The crux of the problem isn’t so much a reliance on measuring performance; it’s the assumption that measurable equals significant.
Organizations are often obsessed with measuring metrics, even though those same metrics sometimes do not truly matter to an organization’s success. These metrics aren’t designed to provide a clear picture of why something is or isn’t working; rather, they simply demonstrate what is going on.
They aren’t about showing how frustrated customers are; instead, they show that the satisfaction level has fallen. They aren’t about the employee turnover going up but about what has led to employee discontentment over time. An organization’s ability to identify the causes of declining numbers is critically important, yet metrics cannot illustrate the complexities driving performance from the bottom up.
This weakness is exacerbated, in many cases, by the fact that metrics are, by their very nature, selective. Each KPI necessarily prioritizes some aspects of performance while overlooking others. Organizations use metrics to measure performance based on what they perceive as critical, yet the business environment and consumer expectations require new perspectives. The KPIs organizations rely on may therefore cease to align with the reality on the ground.
It is simply a matter of fact that metrics are better indicators than drivers. When the system measures certain behaviours and outcomes, employees quickly adapt by doing what the system wants them to do. When employees are measured on customer service call time, for example, they learn to hang up with customers as quickly as possible rather than solve their problem. Metrics lead us to manipulate an organization’s output through what we measure, even if what we measure isn’t indicative of success.
“The problem isn’t a measurement one; it’s a knowledge one. You can know the velocity; you just don’t know where you’re headed, and therefore you just don’t know what to do, which makes managing impossible.” – Jeff Bezos
This system of performance relies upon measurement for decision and action-taking but neglects the human aspect; instead, it relies on information that is already visible or reportable. The challenge is that all of this is usually evident on a dashboard if it is tracked or measured.
With that said, not all aspects of the performance in the workplace are quantifiable:
Trust is hard to measure
Honesty cannot be quantified
Creativity or foresight doesn’t have to be demonstrated on a chart
These are not all reflected in The Official Market, as every metric, KPI, report or business scorecard makes choices about what’s relevant and what isn’t.
Sadly, by focusing solely on what we can readily identify as critical and important, many organizations inadvertently start to devalue or even ignore areas they cannot easily quantify. That, it has been said, means the information in their reporting systems may be missing valuable pieces or even be flat-out misleading.
One example is a business intelligence system that tells people how busy employees were in the office (measured by time spent at the desk, use of specific tools, etc.) but does not measure the outcomes of that work. This system has become completely removed from the actual outcomes that would determine whether employees were actually working effectively or not.
In such instances, organizations become overly dependent on such formally measured criteria and risk suppressing human judgment or observation that would otherwise point them toward a problem early on.
The Black Market
There’s one in every organization.
It might not show up in your year-end results. It might not be mentioned in a quarterly review. It definitely will not be in your executive dashboard, but nearly everyone in the company knows it.
This is the KPI Black Market; this is where you would go when your formal measures do not tell the same story. The name is controversial, but it should not be when people search for additional data to navigate a complex business. If an organization goes to great lengths, many beneficial ideas may fall outside measurement standards.
The Conversations That Never Make the Dashboard
Companies have invested significant resources over the past few years in business intelligence tools that afford a live view of operations. However, much of an organization’s most useful intelligence still travels via conversation.
A sales leader hears multiple account managers mention the same customer pain point.
A product leader notices an increase in “what is that for?” type questions about a new feature.
A team lead finds conversation in their team’s hushed post-all-hands meeting.
A customer success manager starts hearing unusually similar wording in otherwise unrelated client calls, hinting at a shared frustration that hasn’t been logged anywhere yet.
A regional manager notices that high performers are suddenly asking more “confirmation” questions instead of making autonomous decisions.
A project lead observes that status updates remain technically positive, but the tone of delivery shifts: shorter messages, fewer details, less narrative confidence.
An HR partner hears recurring “soft exits” in development conversations – people talking more about uncertainty, optionality, or “keeping an eye on things” rather than commitment.
Those aren’t standard metrics, but they often show trouble before it hits the Profit & Loss (P&L).
That’s partly why leaders place so much importance on informal conversation – it’s where emerging signals like doubt, disappointment, enthusiasm, and apprehension get aired while they’re still in their most formative (and useful) stage.
Once a signal is a metric, it’s already past the critical inflection point. That is due to the fact that dashboards chronicle what happened, while conversations signal what’s about to happen.
We write down and archive at an unforeseen speed, yet much of our knowledge is often contained…elsewhere. That knowledge often moves through the Black Market, with almost blinding celerity.
The Mental Dashboard
Try asking an experienced sales leader what will make the quarter miss your target. They often start with “I have a feeling.” It’s the kind of thing a data scientist will probably break out maniacally in a feverish rash at the sound of it.
How can they predict they might miss when the company invests millions in data and analytics to give you objectivity?!
However, the data science in judgment and forecasting actually supports this kind of intuitive forecasting: experts use intuition often not at random but rather to detect patterns that may not show up explicitly and may even be unable to be easily and systematically articulated, due to experience (e.g., having interacted with customers, products, markets, negotiations, and company stakeholders), which can be more sensitive to some cues than others.
You might experience it as a feeling or a sense:
A salesperson feeling the heat because customer engagement seems “off” but has not yet been captured by metrics.
A regional manager in your organization who believes they sense unusual nervousness in the sales reps during customer interactions.
Customer success may note that the typical post-demo and pilot behaviour among clients has changed slightly, but it is not yet affecting metrics such as engagement and churn. In these kinds of instances, they are not officially being recognized by your data platform.
Yet these sorts of signals often influence forecast judgments, however indirectly. Leaders, in essence, operate with two dashboards: one that they see on their screen and another that resides in their head.
One is evidence of what is happening. The other is the interpretation of what’s happening. Neither works well without the other.
The Spreadsheet Nobody Talks About
Perhaps one of the most unaddressed elements of organizational life is the presence of shadow forecasting mechanisms.
Officially, there’s an organization’s forecast. Unofficially, there often exists a second forecast, which may exist in the form of an individual’s private spreadsheet, in an individual’s notebook, or through individual or team discussion.
It is likely, in some form, that this meeting has been heard in every organization where one exists.
The company forecast is presented.
The numbers look perfectly healthy.
Then inevitably someone pipes up, “OK, but what do we actually think?”
The line dividing the Official and Black markets is drawn with that phrase. The Official forecast might be the organization’s most formal assessment, but the Black Market forecast often represents a compilation of individual experience, customer issues, the news and anything else that doesn’t easily lend itself to tabulation.
It’s curious that shadow forecasts don’t necessarily always compete directly against official outputs. Indeed, they can arise as employees try to circumvent gaps they see in the official mechanisms. The fact of there being a spreadsheet doesn’t necessarily matter, since it is the quest for a depiction of reality that people believe in.
Tribal Knowledge and Unofficial Indicators
Arguably the hottest currency in the KPI Black Market is tribe experience. Most organizations have individuals who seem to be aware of certain things well before the rest of the population becomes aware of them. Those individuals understand which projects are real and which generate polished-looking status charts. They can usually predict the top truly unserved and unhappy customer base even before official complaints surface.
Such employees know which operational hazards warrant attention, even when they do not appear in risk analyses. What’s truly fascinating is that these fellows often don’t even have access to data; however, they have contextual gut feelings. By virtue of experience or informed hunches, they understand and see patterns that systems simply can’t capture.
These people remember what happened last time. They recall the anger, the shouts, the boasts, the merriment, or the frustration. They are living archives, in a sense. As such, organizations often defer significantly to individuals who cannot effectively translate the value of their insights into metrics, yet that value is very much there.
This then creates an interesting paradox.
On the one hand, companies may champion objectivity; on the other hand, in uncertain environments, they often turn to sources of experience who, by their nature, are not subject to objective measurement systems. Similar principles are evidenced in how folks make decisions in the informal universe on a day-to-day basis.
Managers observe how quickly answers are transmitted for questions and inquiries.
Account teams pick up on the customer’s emotional tone rather than on official customer satisfaction reports.
Product team leaders keep their eyes on the number of surprises.
Executive team members will note when the “unhappy camper” stops raising their objections.
These signals often aren’t included on charts but have a tremendous impact on decision-making, at times having a significantly greater impact than the official scores themselves.
Why the Black Market Exists
It may be tempting to see these informal arrangements as proof of the ultimate failure of formal measurement. This is a faulty assumption that relies on a complete misunderstanding of the very premise. The existence of the KPI Black Market signals that organizations are, ultimately, human systems operating in contexts far more complex than can ever be fully captured by numbers.
Dashboards cannot account for every variable. KPIs cannot enumerate every risk. Reports cannot portray trust, morale, judgment, intuition, confidence, or culture. When people and groups try to find order in increasingly chaotic surroundings, it is natural that they create complementary information systems – the KPI Black Market – that support and backstop formal systems. The KPI Black Market is thus not a conspiracy against data, but a very reasonable response to its ultimate shortcomings. It is a natural evolution of a most logical process.
Perhaps the most important irony is that most organizations already rely upon the inputs of this unrecorded channel: they simply do so informally and under the table.
The highest-trusted and most timely signals usually originate elsewhere – between peers, during hallway discussions, through personal observation, or based on embodied tacit knowledge. The KPI Black Market is more prevalent in complex environments where reality is perennially richer than our metrics, and, more generally, in organizations that have simply done too poor a job of creating formal indicators.
What Should Leaders Do About the KPI Black Market?
The existence of the KPI Black Market does not, of course, suggest that companies should discard their dashboards, scorecards, or formal reports. Au contraire!
Formal measurement is crucial if organizational performance is to be consistent and comparable, and if accountability is to be meaningful rather than arbitrary, and so much so that the Official Market is an essential part of organizational life.
The problem isn’t that organizations formally measure performance; it’s that they treat formal measurements as complete representations of reality rather than partial ones.
Great leaders recognize that the best dashboard or scorecard cannot do their thinking for them, but can help them think, and that, in addition to the question “What does this metric say?”, a second question needs to be asked.
“What’s missing from this metric?”
A necessary shift in focus leads to the treatment of signals and the observations of employees as information & value, not noise. The aim here isn’t the wholesale abandonment of measurement, but the supplementation of metrics by insight.
A similar approach can be found in the management literature, and the argument has long been made that formal management controls necessarily contain gaps that must be filled by managerial judgment, a concept of “informal justice”.
In essence, such judgments may allow us to question the validity of a metric because it has not kept pace with changing circumstances. Perhaps the easiest way in which to undertake a measure of diagnosis is for a team of leaders to take the time to ask management to list all of the things that management considers important, and then see what doesn’t appear on the board.
Final Thoughts
It is increasingly common to portray organizations as rational, analytical, almost-organic beings in which decisions are data-driven, and metrics are king.
To a certain extent, this is true. Most of them are, indeed, social entities – powered by the experience, intuition, confidence, and understanding coming from their members. Such a sentiment would be historically true as well, as it was the case well before dashboards existed – managers trusted their intuition and vision. Long before business intelligence platforms were born, people discussed and understood their environment to proceed forward, even when uncertainty loomed like an overcast sky.
Although our reporting tools now offer unprecedented visibility, this doesn’t deny the need for those implicit ways of leading teams to progress. Frankly speaking, they simply shouldn’t impede this.
It would be a naive mistake to assume all critical variables can be measured, as the key predictors of an organization’s success are sometimes elusive to quantification. These signals originate from talks, gut feelings, interactions, observations, and events, which never exactly translate onto a metric dashboard.
However, leading companies leverage both, sometimes in equal measure, and often to great success. A dashboard illustrates the past, while those close to the business can provide current-state insights and often foresight.
This is the key takeaway one should derive from the KPI Black Market. The real value is found where the most trustworthy predictors remain off the official dashboard.
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Looking to strengthen your expertise in KPI design and performance measurement? Gain practical knowledge, proven methodologies, and globally recognized certification through The KPI Institute’s Online Certified KPI Professional.
Picture the following: a customer service team boasting average response times under two minutes. Customers are always getting responses right away. Every target is being met. Yet, customers keep complaining, and complaints are only growing.
How is that possible?
After investigation, you find that while customers are receiving rapid responses, those responses may be doing little to resolve their issues. The team members have been incentivized to close tickets quickly because that is what’s being measured. The original purpose (making customers happy) is now secondary.
This can be a very common issue within companies of any size. KPIs that once represented success are slowly becoming success itself. They stop asking “are we accomplishing what we intended to accomplish?” and start asking “are we meeting the target?” The difference between these questions might seem negligible, but the implications can be significant.
KPIs have a place and are indeed beneficial. Companies need a way to evaluate performance, track progress, and understand where improvement is needed. Without measurements, we operate based on assumptions and intuition alone.
The difficulty is that there are many things that organizations care about that are not easily measured. A single number can’t capture employee loyalty. Employee engagement isn’t the same as a survey score. Collaboration, trust, innovation, and long-term business value just don’t fit on a dashboard. As a result, companies use leading indicators, which we assume represent a desired outcome.
Response time is often seen as a sign of good customer service. Attendance is assumed to show employee commitment. Productivity numbers are assumed to prove effectiveness. This is okay to an extent; in fact, these are often necessary indicators to track. Problems arise when the leading indicator outweighs the outcome it was originally designed to represent.
Economist Charles Goodhart explained this concept best in a statement now known as Goodhart’s Law: “When a measure becomes a target, it ceases to be a good measure.” This may sound academic, but the underlying concept is easy to grasp. The moment people are measured, rewarded, or punished by a metric, they naturally seek to optimize for that metric. This optimization might increase performance, but sometimes it only improves the metric.
Consider training for employees. We often measure learning by tracking whether training has been completed. Seems fair on the surface – if an employee completes the training, they are surely learning, right?
Well, not necessarily. When the number of completed trainings becomes a target, the focus shifts.
Employees quickly click through > managers ensure there’s 100% completion before deadlines > dashboards turn green > knowledge retention, skills development, and behavioural change stagnate. The company succeeded in increasing the number but made little to no progress on the desired outcome.
This trend plays out across various industries and sectors. Salespeople push for revenue through deep discounts, thereby impacting long-term profitability. Marketing campaigns aim for engagement numbers even though engagement might be disconnected from real customer value. Project teams celebrate on-time delivery even though the project might not provide tangible benefits. The issue here is not that the metric is necessarily incorrect. The problem is that it only represents a piece of the whole.
A useful analogy for KPIs is to think of them as road signs instead of destinations. Signs tell you if you’re going the right way, but we don’t mistake the sign for the destination itself. Organizations often make this mistake:
Customer satisfaction is not a survey score. ❌
Productivity is not a speed metric. ❌
Attendance does not show employee contribution. ❌
These are signals used to help us understand reality, not reality itself. This difference becomes even more critical when organizations prioritize results while ignoring the actions that lead to those results. A revenue number from last month tells you what has occurred; it doesn’t tell you why. A customer satisfaction number indicates the outcome of a given interaction; it does not show the behaviour displayed during that interaction. By the time a revenue number changes, the behaviours that affected it may have been in place for weeks or months.
That’s why increasingly successful organizations are beginning to differentiate between outcomes and the actions that produce them. Outcomes serve as scorecards, letting you know where you stand. Actions and drivers help you understand how you got there and what you should do next. If leaders focus solely on the scoreboard, they are more likely to react to events after they have occurred. If they understand what causes the score to change, they will be able to influence future outcomes before they become problems.
Through this shift in thinking, we can reach an important conclusion: not all KPIs should be created equal. Some measures help us assess progress towards desired outcomes; others serve as proxies for those outcomes. For leaders, the biggest challenge is recognizing which is which. If the measure becomes the mission, organizations risk optimizing for the numbers rather than for the results they represent.
How Proxy Metrics Quietly Take Over
If most organizations know that KPIs are just indicators, how do so many organizations end up managing the indicator rather than the outcome?
The simplest reason is that proxy measures are convenient.
It’s often hard to measure the actual outcomes we want to influence. For example, real outcomes can take years to show any real results, often can’t be easily isolated from other variables that also affect the outcome, and usually don’t fit well on a dashboard. Proxy measures, on the other hand, are easily and readily available to be captured, reported, analyzed, and benchmarked.
Consequently, organizations tend to get caught in a cycle. Instead of asking “what would indicate we are truly successful?“, they ask, “what data do we already have?“. The available metric slowly evolves into the performance measure.
While this sounds relatively harmless, it quietly creates a shift. Individuals stop focusing on how well they are achieving the actual outcomes and begin talking about achieving the numbers on a dashboard.
Discussions focus on “have we hit the target?” rather than “have we made real progress toward achieving our goal?” The indicator becomes the lens through which we interpret performance, even when it tells only part of the story.
This isn’t to say proxy measures are useless; many of them can provide helpful insights. It’s simply assuming that the proxy and the outcome are one and the same, which is the problem.
For example, completing a training course may indicate that learning has taken place, but it doesn’t confirm any real change in capability. A high customer engagement rate can indicate interest, but does it lead to customer value? An increase in sales calls doesn’t always mean more quality customer conversations were held. These proxy measures may be useful in isolation, but they don’t tell the full story.
Unfortunately, once a metric is valued, people tend to drive it. Usually, this is not due to manipulation or intentional bad practices; it is simply how human beings behave. If a KPI target is linked to rewards, positive feedback, promotions, or performance reviews, people will make sure to meet this metric regardless of whether it aligns with desired outcomes.
The problem then becomes that an increase in a KPI may not necessarily lead to the desired increase in the outcome. There are countless examples throughout history of this behaviour, such as using the enemy’s body count as a measure of success in wars. Such a heinous & vile metric was easier to achieve than actual strategic objectives, and, eventually, simply measuring the metric became the objective itself. The measure dictated the outcome, rather than the outcome shaping the measure.
Now, whether we look at armies or organizations, both can fall victim to the same thinking pitfalls, for they are comprised of people who often err on what is “easier”. Leaders can start managing what’s easy, rather than what’s important.
In a much less combative example, take the instance of a decrease in cost-per-lead: at face value, it doesn’t make much difference if lead quality falls dramatically; an improvement in customer service response times does little if customers still have the same unresolved issues, and a team celebrating meeting all its targets still doesn’t achieve its business goals. Each example shows that the KPI rose or fell as intended, but the desired outcome didn’t.
Perhaps the most intriguing part is that organizations and their people usually know the source of the disconnect:
The sales team knows when target numbers promote busywork
The customer service department knows that quick responses are not the same as solving customer problems
Managers know that an increase in attendees does not necessarily correspond to greater commitment or contribution
However, when people feel a sense of control and certainty that a KPI is moving in the right direction, it becomes difficult to abandon the number, even if we know the real outcomes aren’t shifting as desired.
Numbers, nonetheless, seem more objective and reliable. They are concrete and clear, and they appear to remove uncertainty and complexity from a situation. Clarity, though, is not always accuracy.
A dashboard displaying green lights may suggest great progress, while unseen problems begin to fester beneath the surface of these simple indicators. As an organization becomes adept at performing the actions that achieve the highest success scores on a given metric, it simultaneously develops considerable inertia in achieving its real objectives.
This is why mature performance management systems do not focus on individual metrics, but rather on the overall view. A mature system must incorporate a mix of qualitative data alongside quantitative metrics, so that no individual KPI carries too much weight in determining perceived success.
The real question is not whether there should be proxy metrics at all; it’s whether they are remembered for what they represent. If leaders forget what a proxy metric is supposed to indicate, an organization will spend its energy improving the number rather than the actual desired outcome.
The Five Most Common KPI Traps in Modern Organizations
This quest for proxies seems to manifest itself in infinite ways, yet it follows the same several templates that recur over time, across industries and across hierarchical levels. Although the metrics might vary widely, the error appears eerily similar: the metric eventually succeeds in displacing the thing it was intended to measure.
Response Time Replaces Customer Care
Many customer service teams monitor response time for good reason. Customers typically appreciate quick communication.
The issue is when that speed becomes the primary goal. A team might respond to every single inquiry within minutes, but the response could be generic and fail to resolve the issue. Customers are acknowledged quickly, but still require multiple touchpoints to reach a solution.
This looks good on paper, but in practice, it increases customer frustration. Response time is an important measure, but it isn’t customer service. Customer service is all about understanding problems, solving them, and generating positive experiences. Speed may well be an important factor in achieving these goals, but it alone cannot do so.
Engagement Replaces Value
Engagement has emerged as perhaps the most ubiquitous performance measure in the digital age. Businesses track page views, click-throughs, comments, shares, downloads, logins, and a million other interactive behaviours. Such figures are often collected automatically and can be updated in real-time.
The problem is that this engagement does not necessarily mean any value is being created.
Some content receives millions of page views, while its consumers gain minimal new information. A few software platforms log millions of user logins – their consumers remain stuck performing rudimentary tasks. Several meetings involve many staff members, yet only a handful contribute to improving outcomes.
Engagement does not necessarily mean useful things are happening. It signals that people are attentive. If organizations focus solely on engagement, they create organizations that focus on visibility.
Productivity Replaces Effectiveness
One of the oldest and most frequently measured indicators of performance is productivity.
The number of tasks performed, phone calls made, e-mails sent, reports generated, and tickets closed can tell you something about how busy things are and about operational efficiency. However, you should never confuse activity with effectiveness.
One salesperson can be two or three times as active (in terms of calls made) as another, while identifying far fewer useful sales opportunities. One project team may tick off all the task items on their schedule without having solved the problem the project was designed to fix.
Productivity asks, “How much work got done?“
Effectiveness asks, “Does it matter?“
Organizations that focus on productivity often become incredibly busy without ever becoming more effective.
Attendance Replaces Contribution
One of the easiest measures to monitor is attendance.
People either turn up or they do not. The measurement of contribution, however, is far more involved: someone can attend every meeting and add nothing, whereas another may contribute only two or three times, yet those points may be instrumental in forming key decisions.
It may also be the case that an organization equates attendance with contribution when, in reality, contribution levels depend on involvement, knowledge, collaboration, and the ability to solve problems. Attendance is a good operational measure. That said, it is NOT an indicator of success.
Output Replaces Outcomes
The most frequent KPI pitfall is the confusion between outputs and outcomes.
Outputs are the products an organization puts out.
Outcomes are the effects of these outputs.
Although obvious when articulated, it is often lost when trying to measure things.
Think of a facility team whose job it is to clean an office building. What the facility team measures might include the number of floors cleaned, the time spent cleaning, or the amount of cleaning supplies used. These are all outputs because they show activity. The number of floors is an output; the number of floors scrubbed (to the point they were clean and didn’t feel sticky) would be an outcome.
What if the employees continue to complain that the floors are sticky? The output numbers suggest the team is successful, but the outcome proves otherwise.
The same logic applies to training programs, change management initiatives, marketing campaigns, and transformation projects that are measured by training completion, logins, impressions, and milestones. The output metrics tell us that we did things, but the outcomes measure whether we actually made anything happen. Both are needed.
When we are so focused on outputs, however, we run the risk that they become the sole measure of success, so the team can meet every goal, complete every task, and satisfy every reporting requirement but do absolutely nothing. That’s why there is such risk associated with proxies – they allow us to progress on paper while standing still.
What High-Performing Organizations Measure Differently
At this point, it may sound like the answer is just to get rid of KPIs entirely. Far from it. The matter of fact could not be farther from the truth.
While organizations need measurement, leaders need visibility into performance, and teams need feedback to understand whether their actions are moving the organization in the direction the leadership intends.
The problem is not measurement itself; the problem is making sure the measurement is connected to the thing it’s supposed to be measuring. High-performing organizations understand that KPIs are learning and decision-support tools, not outcomes in themselves. They use metrics to understand performance, and they avoid the urge to turn a metric into an outcome.
I) One of the most critical adjustments they make is to separate outcomes from the behaviours that lead to them.
Many organizations focus almost entirely on outcomes: revenue, customer satisfaction, retention, profitability, market share, and similar figures that often top executive dashboards. These numbers are important, but they are also trailing indicators – they tell you what already happened. When customer satisfaction scores start to slip, the underlying reasons may have existed for months. When revenue declines, the factors that led to the drop may have been building for quite a while.
Whilst high-performing organizations do keep a close eye on outcomes, they also identify the behaviours and performance drivers that contribute to these outcomes:
A sales team might be concerned with revenue as an ultimate outcome, but it also looks at the quality of prospects it’s working on, the level of activity its team has-how many calls and meetings-and its closing rate. All of these will affect revenue and allow leaders to spot problems before they significantly impact sales figures.
A customer service team will continue to track customer satisfaction scores, but it will also look at how many times a customer contacts it for a single issue, how quickly agents respond, the quality of communication, and customer effort.
The objective is not necessarily to replace outcome measures with behaviour measures, but to tie them together.
Outcomes tell you where you are, behaviours give you an idea of how you got there, and where you are likely to go in the future. This changes how you use KPIs from simple reporting tools into proactive management tools.
II) Another difference in mature performance systems: these organizations rarely use a single metric for an important organizational objective.
Let’s use customer experience again: organizations often turn to NPS or customer satisfaction scores. These have value, but no single metric adequately describes the concept. It may make more sense to use customer satisfaction metrics alongside retention rates, complaint counts, resolution speed, customer effort, and actual customer feedback.
Each one captures a different piece of the puzzle, which is why they should be looked at together. The same logic applies to nearly every other aspect of the business.
Revenue should be examined along with profitability.
Productivity along with quality.
Employee engagement along with retention and performance.
Efficiency along with effectiveness.
When measures are viewed as interconnected pieces of information, the temptation to optimize one measure at the expense of another diminishes significantly.
III) Lastly, and probably most important of all, high-performing organizations retain an element of wonder about what they might be missing with their KPIs.
They understand that metrics are a form of simplification and allow us a glimpse into the world of perceptions. No dashboard can fully capture customer trust, employee loyalty, innovation, culture, teamwork, or the ability to adapt; yet all of these can be profoundly important drivers of organizational success.
Instead of assuming that every important thing can and must be expressed as a number, leaders at mature organizations accept the inherent limitations of measurement and complement their data with conversations, observations, customer inputs, employee knowledge, and professional judgment.
In other words, they use data, but not as a replacement for decision-making, since the purpose of performance management is not perfect reports but reports that provide a deeper understanding of performance. Such work takes more than merely watching numbers on a screen.
A Simple Test for Every KPI You Use
The risk of proxy metrics is that it is uncommon for a bad metric to be bad to begin with.
They usually begin as rational indicators of important goals and slowly take on a life of their own as companies get increasingly obsessed with bettering the indicator itself. This necessitates periodic reevaluation.
Each of your KPIs should, on occasion, be examined with a basic but critical question: Is this metric still telling us something about our performance, or has it become the performance?
The answer may not be crystal clear, but a few practical questions can reveal a KPI that might be losing sight of the original goals.
What outcome is this KPI supposed to represent?
Each metric should relate clearly to an organizational goal.
If the goal is unclear or hard to articulate, the KPI might be measuring activity rather than progress. One helpful test is the question “Why should we even care about this number?” The answer often highlights whether the metric is still relevant to the desired outcome.
If the KPI improves, does the outcome necessarily improve?
If you can improve the metric without improving the outcome, there is a risk that the KPI serves as a surrogate for something weaker.
Training completion can increase without any skills being gained.
Website traffic can go up without any value being added.
Response times can increase without the customer’s problems being solved.
You should be very wary whenever it’s possible to optimize a KPI independently of an outcome.
What behaviours does this metric encourage?
Performance metrics influence all actions. Some actions will be productive, some less so.
A sales performance metric can prompt positive customer outreach. It may also prompt undue discounting.
An activity performance metric can prompt work, but it may also prompt busywork.
So, the question is not simply whether a KPI triggers activity, but whether it triggers beneficial activity.
Can people hit the target while missing the point?
This issue seems to be at the very core of Goodhart’s Law: if it is possible to obtain the metric without producing the desired result, then the KPI may become the goal.
A lot of the examples mentioned within the article fall into this category – where the team “hit the number” and still made little real progress toward the overall aim. In these cases, other indicators may be necessary.
What important outcome are we not measuring?
Each KPI measures just one dimension of the business. As attention to any specific KPI increases, another aspect of performance will likely fall into a “blind spot.”
Customer acquisition may be analyzed, while customer retention is neglected.
Productivity may be measured, while quality is left out of the discussion
Operational efficiency may be increased at the expense of innovation
The ongoing question of what is not on the dashboard will ensure that important business outcomes do not fall completely out of the organization’s mindshare.
Final Thoughts
KPIs remain one of the most powerful tools for leaders to align efforts, monitor performance, and allocate resources.
With that said, they are but a tool. They break down when an organization forgets the difference between the metric and the outcome the metric is supposed to capture.
A fast response isn’t great service.
High engagement isn’t value creation.
Productivity isn’t effectiveness.
Attendance isn’t a contribution.
Output isn’t impact.
The best organizations remember and manage accordingly; they use numbers to inform judgment rather than replace it. They focus on outcomes while being acutely aware of the behaviours that produce them. They remain attuned to the fact that a helpful metric today can become a damaging target tomorrow.
At the end of the day, a KPI’s value isn’t in proving that we can win at numbers. Its value lies in helping us improve our numbers. That’s when KPIs truly fulfill their potential as indicators of success rather than proof of it.
