The KPI Silo Effect

1. The Illusion of Local Optima: In organizations, people rarely make bad choices out of malice. Each department acts completely rationally within the boundaries of its assigned KPIs. When Procurement saves material costs, it fulfills its goal — even if Production suffers expensive rework later.

2. The Incentive Trap: Traditional bonus systems reward departmental success in isolation. The result: Department leads collect full annual bonuses, while company net profit collapses.

3. Goldratt's Law & Systems Thinking: "Tell me how you measure me, and I will tell you how I will behave." (Eliyahu M. Goldratt). Only when goals and KPIs are transparently linked to the shared company mission (e.g. via OKRs or value-stream metrics) do you build a culture of shared success.