“If you can measure it, you can manage it” is basically the core theme when it comes to modern management. Data has taken on an exceptionally prominent role in the way organisations evaluate employee performance. One way in which data is used to manage employee performance is through assigning metrics in the form of targets/KPIs to each individual to ensure accountability and standardization. In this post, we will take an in-depth look at KPIs and their impact in the workplace.
What are KPIs?
As an organisation you state your mission, identify stakeholders and define your goals. Then, you need a way to measure your progress toward those established goals. Key Performance Indicators (KPIs) are such measurements. They are customized based on the type of business, industry and even people!
How would you define KPIs for your business?
Before you start the process of establishing and measuring KPIs, you must acquire a very good understanding of your business and its objectives. Then you need to translate your business objectives into achievable goals. Once you have determined your goals, you will select KPIs to achieve each of these goals.
When defining KPIs for your employees think of these first:
● Which metrics will indicate that you are successfully pursuing your vision and strategy? E.g. one KPI set is to measure the number of complaints one receives; the vision is to be the best in customer service.
● What should you use as a benchmark? E.g. do the competitors state data that shows that they’re excelling in a certain area? Construct creatively from your own experience, what would a reasonable goal to attain look like?
● Could the metric outcome be manipulated? How will you prevent against this?
● How will you assess these KPIs and how often? Will you do this in a 6-month performance appraisal? Or earlier/later? Why?
Here are a few ways you can set KPIs for your organisation -
Quantity: The amount of units produced, processed or sold is a good objective indicator of performance. But be careful about placing too much emphasis on quantity – Sometimes quantity does not translate to quality. E.g. Selling of many small cases.
Quality: You could measure quality in several ways. For example, the percentage of work output that must be redone or is rejected is one such indicator. In a sales environment, the percentage of inquiries converted to sales is an indicator of how good your sales person really is.
Timeliness: How long it takes to complete a job is another performance indicator important in every business. For example, in manufacturing, it might be the number of units produced per hour or day, or in customer service, the number of customers served satisfactorily.
How will KPIs impact your workplace?
Certainly, having KPIs aligned to your organisation’s mission can have a positive impact on your workplace. With more goal-oriented tasks and employees. However, having too many KPIs can be detrimental to your organisation as it can be too rigorous. Ten is a good number for KPIs or even less as long as they are relevant and clear. If more than ten, then you run the risk of employees becoming disengaged, ignoring them altogether or making them work under unreasonable KPIs. Remember… KPIs are only indicators of measurements of your efforts - not the goals themselves. In order for them to be meaningful, every indicator needs a target or benchmark. But this target is more of a reference point to tell us what is good or what is bad, not something to be followed word for word. KPIs are powerful tools if they are used appropriately and not abused to measure the delivery of the goals. However, if the KPIs become the goals, then they inhibit performance improvements.
What do you think about KPIs? Do you use them?