29 Sep 2016

KPI gaming

Came across this excellent, in-depth article on the failure of Target Canada. One of the issues was that products were routinely out-of-stock in the stores (leading to upset customers) while registering as in-stock in the company's SAP system:
At one point, Target Canada had printed a weekly flyer in which nearly every single item featured on the front cover was out of stock.
Eventually, they find one of the causes of the problem:
A small group of employees also made an alarming discovery that helped explain why certain items appeared to be in stock at headquarters but were actually missing from stores. Within the chain’s replenishment system was a feature that notified the distribution centres to ship more product when a store runs out. Some of the business analysts responsible for this function, however, were turning it off—purposely. Business analysts (who were young and fresh out of school, remember) were judged based on the percentage of their products that were in stock at any given time, and a low percentage would result in a phone call from a vice-president demanding an explanation. But by flipping the auto-replenishment switch off, the system wouldn’t report an item as out of stock, so the analyst’s numbers would look good on paper.
Chapter 12 of Agile IT Org Design is on metrics. It argues that we have to be very careful of elevating measurements to targets and KPIs. Case in point.