Organisational leadership often faces pressure to drive rapid improvements in performance metrics, particularly high-level Key Performance Indicators (KPIs) such as revenue growth, profitability, and customer satisfaction. However, when leaders demand performance improvements without a grounded understanding of how to achieve them, it can lead to misalignment, morale issues, and even strategic failure.
Leaders need to know more than just the goals; they must also understand the mechanisms and challenges behind each KPI to ensure that targets are achievable and sustainable.
When leadership sets ambitious KPI targets without engaging operational teams, there is a risk of misalignment between the strategic vision and the business’s day-to-day realities.
A notable example occurred at General Electric (GE) in the early 2010s. The leadership pushed for high-level performance metrics, explicitly focusing on short-term profitability, but often failed to account for the operational challenges across various units. This misalignment contributed to GE’s eventual difficulties in maintaining profitability and shareholder trust.
Leaders understanding operational constraints can bridge the gap between strategy and execution, fostering realistic and aligned objectives.
Employee burnout
High KPI expectations with little support can lead to employee burnout and reduced morale. When targets feel arbitrary or disconnected from feasible workflows, employees may think leadership is out of touch with their daily challenges.
For instance, the pressure on Amazon employees to meet high productivity metrics, especially in warehouses, has been widely reported. Though Amazon’s leadership continues to emphasise high-performance standards, the lack of on-the-ground adjustments has led to morale, retention, and public perception issues.
Best practices suggest that leaders set performance expectations collaboratively with their teams, establish clear pathways, and provide the necessary resources to support ambitious goals.
Customer focus
Focusing on high-level KPIs without a clear path to achievement can dilute customer focus, especially if employees feel pressured to cut corners to meet targets.
In 2016, Wells Fargo was embroiled in a scandal when employees opened millions of unauthorised accounts to meet aggressive sales targets set by leadership.
This situation highlighted how demanding KPIs without ethical oversight or transparent processes can harm customer trust. To avoid such issues, leaders should focus on KPIs that are customer-centric, aligning metrics with quality and integrity rather than only quantitative outputs.
Inefficient resource allocation
Leadership that lacks operational insight may allocate resources inefficiently in pursuit of KPIs. For example, in recent years, high-level management at Boeing faced criticism for prioritising profit-related KPIs over-engineering quality in the 737 Max program.
The emphasis on financial metrics overshadowed the need for rigorous quality control, resulting in safety issues and a substantial loss of reputation.
Leaders who understand the operational underpinnings of KPIs are more likely to make well-informed resource allocations, ensuring sustainable success rather than temporary gains.
Effective KPI management
To avoid these risks, companies should consider the following best practices:
- Incorporating frontline and middle management insights ensures that KPIs are realistic and informed by day-to-day challenges.
- Establish channels for continuous employee feedback on KPI feasibility and provide flexibility for adjustments.
- Rather than only setting high-level output targets, leaders should identify process-focused KPIs that outline sustainable ways to achieve goals.
- Ensure employees have the tools, training, and support necessary to improve performance.
Demanding high-level KPI improvements without understanding how to achieve them puts organisations at risk of misalignment, burnout, customer dissatisfaction, and inefficient resource allocation.
Organisations can drive sustainable and meaningful performance improvements by fostering a collaborative approach to the KPI setting, where leadership actively understands and supports operational challenges.
Effective leadership in KPI management secures better results and builds a culture of trust, resilience, and long-term success.