How does the concept of causality apply to performance measures in management?

The concept of causality in performance measures in management refers to the cause-and-effect relationship between different performance indicators. It's about understanding how one measure impacts others over time. For instance, if an organization does well with employees now, it can drive results for other stakeholders such as customers in the future. This is because satisfied and engaged employees are likely to provide better service, leading to satisfied customers. Therefore, managers should not just look at performance measures as concurrent numbers but should consider the causal relationships between them.

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KPIs are about relationships – for example, a lot of time and money is spent measuring the satisfaction levels of staff, especially in large companies. What's important to remember, though, Kenny says, is that "KPIs need to reflect the fact that value creation is a two-way street. You want employees to be engaged because you need something from them. And the two-way street for employees is defined by how well the company delivers on the things that they want." Unfortunately, the majority of organizations fail to develop measures around both sides. Consider causality – most managers look at a set of performance measures just as a table of numbers. Because the numbers appear to be concurrent, managers don't question the way each measure impacts the others over time. But leading indicators, Kenny stresses, should predict the future. "If your organization does well with employees now, that drives results for other stakeholders such as customers tomorrow. If your organization does well wi...

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