Oct18
Key Performance Indicators (KPIs) are intended to drive performance, align teams, and track progress toward strategic goals. However, when KPIs are poorly defined, misaligned, or incentivised without forethought, they can be gamed—leading to misleading results and, in some cases, serious organisational harm.
KPI gaming occurs when people manipulate performance metrics to hit targets without genuinely improving results. The manipulation may involve altering data, shifting priorities, or changing behaviours to meet the metric, not the actual goal. This often arises from flawed incentives or poorly chosen KPIs that reward superficial success. You should check out the training programs from Bernie Smithif you want to learn how to do this robustly.
Gaming is not necessarily dishonest—it's often a rational response to systems that reward hitting numbers without examining the underlying issues. The fault lies in the design, not always the people.
In colonial India, authorities introduced a bounty for every dead cobra to reduce the wild population of cobras. Initially effective, the scheme took a dark turn when locals began breeding cobras to claim the reward. When the government cancelled the bounty, breeders released the now-worthless snakes—ultimately increasing the wild cobra population.
The underlying issue? The metric (dead cobras) was misaligned with the objective (fewer wild cobras). It rewarded the wrong behaviour.
In the 1990s and 2000s, UK banks aggressively promoted payment protection insurance (PPI) to consumers, driven by high sales targets. Staff were under immense pressure to meet hourly sales goals, often selling overpriced products, riddled with exclusions, or unnecessary. One bank had a 98.5% profit margin on its PPI product, while consumers struggled to claim payouts.
The single-minded pursuit of profit and sales KPIs often ignored other essential objectives, such as legal compliance, customer welfare, and ethical conduct. The result: massive fines, reputational damage, and compensation costs exceeding £50 billion across the UK banking sector.
At the core of KPI gaming is a failure to align key performance indicators (KPIs) with strategy. Organisations often fall into the trap of defining metrics without fully understanding what they’re trying to achieve. When strategic objectives are unclear or incomplete, metrics become arbitrary. People focus on what’s being measured—especially if it’s tied to bonuses or public performance ratings—rather than what matters.
Strategic objectives should cover more than just financial success. They must reflect a balanced view of business health, including risk management, innovation, regulatory compliance, environmental and social responsibilities, and sustainable growth. If key dimensions are missing or underemphasized, KPIs can drive harmful or misleading behaviours.
Effective KPI design starts with clarity. Organisations should define their goals with precision, avoiding vague or "woolly" terms like “excellence” or “world-class.” Once goals are clear, KPIs should be chosen to support those outcomes directly.
Here are some practical ways businesses can prevent KPI gaming:
Every KPI should tie back to a clearly articulated strategic objective. Objectives should be specific, outcome-focused, and free from buzzwords. For example, “Improve customer satisfaction scores by 10%” is more actionable than “deliver great service.”
Please remember to combine multiple goals into a single statement, if you don't mind. Each objective should represent a single, distinct outcome.
Overemphasising one goal—such as sales or profit—can lead to neglect of others. A balanced set of objectives might include:
When these objectives are balanced, KPIs are less likely to drive harmful trade-offs.
Vague or ambiguous KPIs invite manipulation. Each KPI should have a clear name, exact calculation method, data source, and update frequency. This ensures consistency and transparency, especially when different departments are involved.
Avoid including targets or incentives within the definition itself. Metrics should first be designed for insight—targets and rewards can follow, with caution.
Always ask: “What behaviour will this KPI encourage?” If a KPI can be gamed, it likely will be. For example, setting a target for “calls handled per hour” may encourage employees to rush through calls, damaging service quality.
To safeguard against this, combine KPIs that provide balance. In the call centre example, pairing call volume with customer satisfaction or first-time resolution can prevent speed from trumping quality.
No system is perfect. Monitor how KPIs are used in practice. Watch for sudden shifts in behaviour, unexpected trends, or anecdotal reports of pressure or workarounds. These may indicate gaming or misunderstanding.
Gather feedback from frontline teams—they often know where KPIs are being manipulated or causing stress. Use this input to refine definitions, targets, or even remove harmful metrics.
Linking pay too directly to KPIs can create perverse incentives. Instead of motivating performance, it can breed anxiety, mistrust, and short-term thinking. When incentives are used, ensure they are aligned with long-term strategic outcomes and are regularly reviewed for fairness and impact.
KPI gaming is not just a technical issue—it’s a strategic and cultural one. If metrics are misaligned with strategy, poorly defined, or blindly incentivised, gaming becomes not only possible but likely.
Businesses must shift their focus from hitting numbers to achieving meaningful outcomes. That means designing KPIs that reflect the actual goals of the organisation, anticipating unintended consequences, and maintaining constant vigilance. When KPIs serve strategy—not the other way around—they become powerful tools for insight, improvement, and long-term success.
Do you need help embedding strategic thinking in your organisation? Explore insights, tools, and consulting support from Visualise Solutions, specialists in strategy design, execution, and transformation.
By Andrew Constable MBA, XPP, BSMP
Keywords: Business Strategy, Leadership, Transformation
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