KPIs and SMART objectives are powerful tools but tricky to master
Many companies and (government) institutions are paying more and more attention to the Key Performance Indicator (KPI) and SMART goals. This is logical because they are powerful tools for managers, improvement teams, and controllers. Moreover, KPIs are at the heart of every organization, including yours. The trick is to find them, define them correctly, and use them to adjust faster and improve your processes. But defining and steering by KPIs and SMART goals is a tricky business. It’s easy to commit a mistake. Before you know it you have way too many of them or a discussion arises about the definition of a KPI. We have listed the 5 biggest KPI blunders and pitfalls for you, so you can avoid them in the future.
Blunder 1: Focusing too much on sales growth
A well-known paint manufacturer relied solely on sales and market share as their key performance indicators, even tying senior management’s compensation to these metrics. However, a detailed analysis of process indicators revealed a troubling trend: the more market share they gained, the greater the loss per gallon of paint produced. Despite this critical insight, management refused to address the issue and stayed the course. The result? Within two years, the company faced significant financial trouble.
Blunder 2: Becoming fixated on costs
A mental health institution invested heavily in a management information system. The first “KPI” they implemented focused solely on personnel costs. However, when the annual financial report was prepared, it revealed a nearly five-million-euro loss. The underlying issue? There were too many unoccupied beds – a process-oriented KPI – caused in part by a dramatic reduction in waiting lists, a market-oriented KPI.
Blunder 3: Overloading with KPIs
A medium-sized municipality identified over a thousand KPIs – a true KPI laundry list. Each service, department, and team had several dozen metrics. The initiative was ambitiously named “PURPOSE.” However, managing so many KPIs proved nearly impossible. It’s like a soccer team fielding eleven strikers: not only is it unnecessarily expensive, but it also hinders success, as weaker players interfere with top performers. Similarly, in organizations, an excessive number of KPIs clutters dashboards, making it difficult to focus on what truly matters and diluting the intended impact of KPIs.
The SMART KPI Guide 2025
Do you think that you have too many KPIs? Are you missing the management information forest for the trees? The SMART KPI Guide helps you separate the Key Performance Indicators from the less essential indicators. This handbook contains an overview of KPIs and KRIs from various industries, as well as many practical examples and exercises to help you define the genuine KPIs for your organization. Avoid making KPI blunders with the SMART KPI Guide.
Blunder 4: Setting yourself up with an irrelevant KPI
During our training courses and workshops, this KPI question inevitably comes up: “What is the biggest disaster that could happen to your company?” Daan van Beek, lecturer and author of the Data Science Book, says: “When I taught our master class on Business Intelligence in Singapore, I asked the same question. It immediately pointed participants in the right direction.”
One participant worked for a company that transported gas and oil worldwide using ships. His response drew some laughs: “If one of our ships sinks.” Statistically, this type of disaster happens only once every hundred years. While it’s undeniably a valid KPI, it’s also a dead end because there’s no data to calculate or manage it effectively.
The trick is to shift focus to smaller disasters or near-misses for which data is available. These insights can provide a more practical and actionable approach to managing risks and improving processes.
What our customers say
With Passionned Group’s SMART KPI Guide, we significantly reduced the number of KPIs in our company from 80 to around 15 meaningful and actionable indicators.
Vera Jonker
Parsons Brinckerhoff
Blunder 5: Setting KPIs without a feedback loop
How unfortunate is it when someone has the right insights but still fails to make good decisions—or even makes the wrong ones? One retailer had identified the perfect KPIs and had all the necessary data readily available. The KPIs were updated weekly on the management dashboard, ready to be reviewed and acted upon.
However, the director failed to regularly discuss the results with the product managers, especially when the scores were poor. Instead, he acted impulsively, discontinuing the wrong products. Without feedback from his employees, the story behind the numbers never came to light. And as the saying goes, “feedback is the breakfast of champions.”
KPI blunders and pitfalls: prevention is better than cure
Order the SMART KPI Guide 2025 now: the guide for performance management, KPIs, and data-driven work. Want to know more about measuring and improving with reliable KPIs? Below is a list of articles that will help you better understand KPIs at a basic level.
- Check out the 7 characteristics of reliable KPIs
- Achieve a 200% KPI return
- 24 KPIs for local governments
- The 5 most important requirements for KPIs
- Always formulate your goals SMART
And if all this is not enough, take advantage of the Passionned Group’s years of experience in KPI management and making your goals SMART. Contact us for a no-obligation appointment. We are happy to help you further with, for example, making core KPIs, setting up a strategy map, and/or creating a cool KPI dashboard. We are happy to tell you about the numerous possibilities, scientific models, and best practices.
Daan van Beek MSc, speaker, trainer and author of the BI & AI book 'Data Science for Decision-Makers and Data Professionals'. He is the CEO of the Passionned Group and you can follow Daan on LinkedIn.
