2) The KPI Trap: Performance Metrics That Undermine What They Are Meant to Improve.

hlourens6
Oct 9
6 min read

"Tell me how you measure me, and I will tell you how I will behave.” -— Eli Goldratt

If you found the post “The KPI Trap: Why your people are fighting the system rather than the problem” insightful, you may have noticed similarities to your own mine. It is likely that you have observed dedicated, hard-working teams with positive KPI results; yet the company still faces challenges with an inconsistent flow and unachieved targets.

Why does this persist across the industry?

The answer lies in the fact that we do not understand how traditional KPI systems create a self-reinforcing, vicious negative cycle. But more importantly, we do not realise that a simpler, more constraint-based measurement system will break this and create a virtuous cycle of positive momentum.

The Vicious Cycle

Individual KPIs often create the problems they are intended to solve.

The diagram below maps the cause-and-effect relationships that trap well-intentioned operations into declining performance. Below, we walk through how this spiral develops.

The starting point: Mines are managed by functional efficiency. Historically, this made sense as specialisation drives expertise. The information age has made it easier to measure KPIs across all departments, holding managers accountable for the efficiency of their departments. Managers then use the same KPIs to hold their employees accountable. This makes sense, but it is here where the logic breaks down.

The unintended consequence: Employees focus on their KPIs, even when this comes at the expense of other departments. This is not out of malice, but out of rational self-interest. If you're measure is:

Lower blasting unit cost, then a lower powder factor will help achieve this, but at the expense of digger productivity.
High truck utilisation, then over-trucking may help achieve this, but at a higher haulage unit cost.
There are countless examples.

The erosion of trust and cooperation: When departments optimise locally, systemic problems occur, and overall performance decreases. Trust and cooperation decline because everyone is defending their KPIs, while the total system output decreases. Psychological safety is compromised as employees engage in "debate and polite compliance"—they observe the dysfunction but remain silent because pointing it out may be perceived as undermining team cohesion.

The management response: Frontline management and workers increase their efforts to overcome the underperformance. As management seeks more and tighter KPIs, the understanding of the overall process further fragments, and we begin drowning in additional data. As the number of KPI’s increases, greater conflicts in reasoning occur.

The death spiral: The harder management pushes, the more workers comply without believing, and the cycle intensifies.

The red arrow in the diagram indicates the negative feedback loop that traps us in a cycle of declining performance. This cycle persists as it appears rational at every step. Every individual decision makes sense in isolation, but it is insidious:

Holding managers accountable for their departments is reasonable.
Using KPIs to drive performance is standard practice.
Employees focusing on their measured areas is an expected behaviour.
If management pushes harder when results decline, it is a natural response.

The system fails not because anyone is incompetent, but because local optimisation creates competing priorities and therefore guarantees the whole system's failure.

Eli Goldratt's quote captures this perfectly: "Show me how you measure me, and I will tell you how I will behave." Your people are not failing—they are just responding rationally to the measurement system they need to satisfy.

The Virtuous Cycle

The diagram below shows how constraint-aligned KPIs, managed through a Flow Room, can create a positive dynamic.

Constraint-based KPIs create sustainable performance

Fundamental to the Theory of Constraints is that in any system, there are only a few critical leverage points that significantly impact overall performance. By focusing on these leverage points—specifically the constraint—we can eliminate the negative spiral and create a self-reinforcing and positive feedback loop.

Single point of focus: The entire operation aligns around the constraint—the one leverage point that determines total throughput. Not multiple KPIs seeking attention, but one drumbeat to synchronise everyone. Reducing the number of KPIs creates focus for the critical leverage points, and organisational efforts become targeted and efficient.

Increased visibility of the critical: By creating a Flow Room where constraint performance is made visible, we foster peer-to-peer accountability. Employees and managers can anticipate necessary actions by observing how their efforts impact performance in real-time.

Shared reality: Everyone sees the same constraint-focused data in the same short daily meeting. No more fragmented departmental views, no more finger-pointing. This transparency bridges the silos and fosters alignment and coordination in the team to support overall system performance.

Forward focus: The conversation shifts from "why did we miss yesterday's target?" to "what could starve or block the constraint tomorrow?" This changes the dynamic from blame assignment to collaborative problem-solving.

Aligned incentives: When maintenance aligns schedules to the constraint's needs, planning becomes collaborative, and operations receive earlier warnings instead of surprises. Everyone sees how their work contributes to increasing flow at the constraint and thereby improving overall system performance.

Trust rebuilds: Because everyone is measured on the same thing—system throughput—cooperation replaces competition. Psychological safety increases because highlighting systemic issues becomes valued, not penalised. As trust and psychological safety increase, employees and managers engage in open dialogue to generate innovative solutions, consistently identifying and addressing system issues from the bottom up.

Management capacity increases: As production flow increases and variability reduces, managers can confidently delegate tasks, freeing up their time for value-adding activities rather than firefighting.

A positive spiral: As flow stabilises, confidence in the system grows. Teams solve problems faster. Employee engagement, trust, and cooperation increase. Management gets its time back. One Head of Operations described a "strange sense of calm and wondered if this was what his role was meant to feel like.”

The green arrows on the diagram show the reinforcing positive feedback loop that drives sustainable performance improvement.

The same mechanism that created the vicious cycle—alignment between measures and behaviour—now creates a virtuous one.

Case study — Anglo American bord-and-pillar coal mine

After introducing a Flow Room and replacing traditional measures with flow-based KPIs, the site lifted daily output from 14,500 to 18,000 tonnes in just four months—an ~24% increase—with negligible additional cost and improved safety performance. At this run-rate, the operation is ~10% above global continuous-miner (CM) benchmarks. As the GM put it: “When we first started this journey, our guys thought it would be impossible to achieve this.”

The Executive Roadmap: From a Negative to a Positive Spiral - Where are you?

The symptoms of the negative spiral are:

KPIs are green, but system flow is inconsistent.
Costs are creeping up despite efficiency improvements.
More time is spent in meetings, and fewer real issues are solved.
Trust is eroding between departments.
Employee engagement is declining.
Targets are consistently not met.

The root cause: Smart people making rational, local decisions in a misaligned system where measures compete and distract them from overcoming the system's constraints.

The Transition to a “Flow Room”

The impact is not the focused KPIs alone; it is the rhythm of daily review that makes them work.

The Flow Room meeting, 30 minutes, same time, same people:

Evaluate yesterday's constraint performance versus the target.
Highlight today's risk to maintaining flow through the constraint.
Discuss tomorrow's potential issues: what could starve or block the constraint.
Assign action plans at the right level with responsibility and timing agreed.

What changes:

Shared reality: everyone sees the same constraint-focused data.
Forward focus: tomorrow's solutions rather than yesterday's causes.
Collective problem-solving: focused teams and collaborative fixes.
Accountability with support: clear performance ownership with leadership backing.

The Resulting Multiple Return on the Investment

Operational outcomes:

Production increases as efforts centre on the constraint.
Variability reduces dramatically (this was observed across 80+ implementations).
Flow stabilises and becomes predictable.
Costs align as throughput improves.

Human capital protection:

Retention: Engaged people solving real problems rather than fighting the system.
Engagement: Teams align on shared objectives and close performance gaps faster.
Development: Supervisors build system thinking, not just functional optimisation.
Culture: Trust and collective problem-solving become part of daily work

The financial results follow when the right people focus on the right things.

The Bottom Line: Fix the System, Not the People

Your team has the capability and capacity; what's lacking is a focus that removes all the noise our legacy thinking creates.

The actions needed:

Identify your true constraint—the leverage point that determines throughput
Align everyone toward continually increasing flow through that constraint
Reduce KPIs to focus on constraint performance
Implement a Flow Room with daily 30-minute reviews
Build a rhythm that creates shared reality, forward focus, and collaboration

The critical risk: Many Flow Room implementations have delivered "superflow," but there is a significant risk to the sustainability of performance. The risk is not the implementation of constraint-based KPIs but rather reverting to traditional KPI systems after a leadership change.

Creating an environment where people can do their best work and a culture of continuous improvement that is sustainable will lead to increased productivity and overall business improvement.

A Final Word to Executives

If your KPIs are green but flow is uneven and below target, the system—not the people—needs fixing. The path forward is clear:

Acknowledge the pattern: Traditional KPI systems create rational local decisions that undermine system performance.
Focus on leverage: Identify and align around your constraint.
Create visibility: Implement a Flow Room for daily constraint-focused reviews.
Build the positive spiral: Let aligned measures drive cooperative behaviour.
Protect the gains: Ensure leadership continuity in the constraint-based approach.

The same organisational energy currently trapped in the negative spiral can be positively redirected. The action is in the system design, not on the people.