As any good manager is aware, company success is not achieved solely by the actions of a single person, but as the result of the contribution of all members of the organization. Management expectations need to be explicit, and employees should be able to easily understand exactly how these goals are related to the success of the company.
Key Performance Indicators (KPIs) are essentially a way to measure company goals while ensuring that these goals and performance metrics have a direct link to the overall mission of the organization. Many businesses are embracing this shared accountability philosophy and use Key Performance Indicators as a way to make sound decisions regarding how the organization’s staff is utilized and how the company uses resources.
For employees to get behind the idea of Key Performance Indicators, they must have a clear understanding of why these indicators are necessary, what these indicators hope to achieve, and how they themselves can make an impact. In turn, this level of understanding empowers employees to do their best work.
If KPIs are not made explicitly clear, managers run the risk of having great employees who consistently achieve low performance ratings or who are seemingly unable to reach their full potential within the organization.
Benefits of KPIs
KPIs that use the balanced scorecard methodology support business activities directly related to the vision and strategy of the organization. They also improve communication and gauge organizational performance. One benefit is that employees as well as management are able to see the big picture in terms of what success looks like for the company.
Another benefit of KPIs is the fact that they create a communal environment in which all employees share responsibility for making the company the best it can be. Managers also benefit from Key Performance Indicators, as they are able to stay engaged with their employees throughout the goal completion process.
Additionally, management has the ability to right the course of employees who may be struggling with the KPIs as well as reinforce the positive behaviors of those who excel. KPIs also allow the work environment to be more open by encouraging employees to embrace constructive feedback and open communication.
Using KPIs to Set Goals
It is relatively difficult to assess performance if it is not not measured in the first place. The outcome that you wish to achieve should be discussed freely with employees so that they know all the steps necessary to reach achieve the desired outcomes.
This means that within any company that uses KPIs, goal-setting is a top priority. This can be done as a part of performance appraisals, or your company can also use informal goal-setting methods.
Employee workshops and KPI-focused meetings can be especially helpful. These events are designed to provide in-depth coverage of such issues as what identified KPIs mean and how they can affect the individual employee as well as the entire company. Regardless of what method your company chooses, KPIs should still be aligned with mission of the organization.
Analyzing KPIs in Terms of Employee Performance
Analyzing how to use performance indicators to reach goals includes discussion of organizational vision as well as organizational objectives, and both should tie into the broad organizational Key Performance Indicators. Employees are not only presented with overall company goals, but are also given individual targets that they will strive to attain.
This will help employees take a personal stake in the process while fostering personal and professional development. At the organizational level, Key Performance Indicators should make it clear just how successful the company has been in the past at setting and obtaining objectives. At an individual level, employees can use the KPI process to quantify how well they are doing in their position in relation to their goals.
Determine Why You Are or Are Not Reaching KPI Benchmarks
It is also important to take time to thoroughly review your KPI structure in order to make sure it is actually being productive for the company. Additionally, analyze exactly why you may or may not be hitting one or more of your KPI targets.
A good example of this would be a KPI that states you need to improve customer service. While a lower complaint ratio may mean that you’re hitting the target, it’s not necessarily good for the company. You must also look at the reason; a decrease in the number of complaints may be due to a reduction in customers, which of course would not be good for business. So, it’s essential to ensure that the KPIs are not only set, but are also thoroughly investigated and evaluated.
Establishing KPIs is not only important for your bottom line, but can also provide meaningful insight to organizational culture and employee performance. Once you have properly aligned your company objectives with employee performance, a great impact can be made on the organization as a whole. The true impact of KPIs can be seen in any company that has mastered the art of understanding that measurable metrics are directly tied to organizational success.