S. David Young
Professor of Accounting and Control
As management accountants and other financial professionals are well aware, organizations of all types rely extensively on key performance indicators (KPIs) to define and evaluate success. To motivate performance, target outcomes for these indicators are often linked to management bonuses. The authors believe that such practices are usually counterproductive. Instead, KPIs are best used as instruments for organizational learning—to identify knowledge gaps that allow the company and its people to cope more effectively with a constantly changing competitive and technological landscape.To make these arguments, the authors propose a concept called “blue-line management,” an approach in which all decisions of consequence are made with one aim in mind: to create value for the organization. This approach stands in stark contrast to the more common practice of “red-line management” in which value creation may be the stated goal, but the business is managed to deliver on specific indicator targets or other objectives to the detriment of value creation.