Companies often use key performance indicators (KPIs) when analyzing and reviewing the success or failure within a company. Simply put, KPIs measure top business goals and growth objectives against quantifiable data. In doing so, this provides an overview of the organization’s overall performance and health. There’s no doubt KPIs serve an important purpose within a company. Unfortunately, there’s a problem with how many business owners approach KPIs.
Research shows most employees feel disconnected from the performance measures set for them. There seems to be a lack of understanding why and how their work connects to the overall purpose of the company. According to Gallup, only 44 percent of workers strongly agree they know how their work contributes to meeting their business’s goals. That means more than half of people don’t know why their work matters. In addition, Gallup also found 53% of people are ‘not engaged’ at work, meaning, “They may be generally satisfied, but are not cognitively and emotionally connected to their work and workplace.”
True leaders know their employees want to be more than a number they must measure up to. Innovating the way we develop performance measures with our employees can help us create more happiness, motivation, and goal-achievement in the workplace. This article discusses how to design company objectives using a more balanced, human-first approach.
What’s Included in Typical KPIs
There’s no formula for determining key performance indicators. Since no two businesses have the same goals, objectives, and data, there’s no way for standardizing the processes of building them. Generally speaking though, good KPIs must be both measurable and achievable.
Examples of KPIs include:
- Quarterly profit margins
- Weekly regional sales
- Annual client retention rate
- Yearly revenue growth
- Monthly web traffic
- Average conversion time
Basic KPIs help track goal achievement and determine the health of the business from a glance, allowing room for pivots, adaption, and changes, too. Nevertheless, when creating and administering KPIs, employees should always be a part of the process.
Rethink What’s Being Measured
While most companies have basic KPIs, or at least performance measures, leadership expert Simon Sinek believes there are more important considerations being left off of the table for discussion. In an interview with James Harding, the co-founder of Tortoise Media, Sinek condemns business cultures created around numbers and not people. He explains the Navy SEALs evaluate their team through two factors: performance and trust. Being a good performer isn’t enough—you also need to be a good person. Evaluating by these standards helps decrease the number of toxic workers and leaders within an organization.
We have “many, many metrics to measure somebody’s performance, but we have barely any, if any, metrics to measure someone’s trustworthiness. So what ends up happening is we favor the high-performer of low-trust. We promote the high-performer of low-trust, until we have toxic leadership, as well as toxic team members,” Sinek tells Harding.
This is a major issue plaguing organizations. Next time when developing KPIs for employees and assessing their performance include measures for who they are as people, too. This helps with recognizing natural leaders, training them, and putting them into positions designed for guiding others.
Develop KPIs Alongside Employees
In a blog for Industrial Psychology Consultants, Memory Nguwi, an occupational psychologist and data scientist says, “Never assign a performance rating to any employee without first agreeing on what needs to be achieved in terms of goals, key performance indicators, and targets.” Agreeing upon performance measures and KPIs with employees is one of the best ways for creating a collaborative, effective working environment. Utilizing their knowledge helps the business set fair, reasonable, strategic goals to measure in terms of evaluating an individual’s performance.
“It’s insulting to have to stop my real work every few hours to focus on the numbers that someone assigned to me without even talking with me,” Marilyn, a software engineer, tells Liz Ryan in an article for Forbes. “There’s no way any measurements could keep up with the changes in our business. We are on the front lines. The measurement-people are way at the back—they are completely disconnected,” she further explains the problem.
It’s important to remember employees offer valuable insight into the organization. Because they’re on the ground working, they’re more aware of poor team performance, business problems, ineffective processes, and other areas requiring improvement. Developing KPIs alongside those working on them helps leaders create better and fairer measurements of success.
Encourage Employee Contribution
Ask employees for their feedback and insight into the business. How would they develop KPIs for the company? Listen carefully and let them know how you might implement their thoughts. This lets the team know they’re playing a vital role in developing company strategy. In addition, it helps guide leaders towards more effective KPIs their workers feel comfortable with. Increasing communication, collaboration, and transparency shows employees the relationship between themselves and their employer is mutually beneficial.
When establishing company objectives, discuss the “why” (purpose, impact, and meaning) behind employees’ work. In The Bright Idea Box by Jag Randhawa, the tech executive says: “All employees have an innate desire to contribute to something bigger than themselves.” Communicating company vision and the purpose of work helps people realize how their job benefits others. Furthermore, giving real-world meaning to their work shows employees how they’re making a difference.
Considering Using OKRs in Place of KPIs
KPI reporting works well for individuals and companies, but many organization opt for other metrics to measure team success. Companies like Google are innovating the measurement tools for employee performance. The business famously uses objectives and key results (OKRs), instead of KPIs. With this tool, people write out their objectives and the measurable deliverables used for tracking progress. Unlike KPIs, teams set OKRs. These goals must be challenging, yet realistically achievable.
Other organizations following suit include Facebook, Spotify, LinkedIn, Twitter, and Amazon, among others. More tech companies are turning towards OKRs because, in theory, they lead to more employee engagement, thus innovation.
“As we’ve seen repeatedly—in Search, in Chrome, in Android —a team composed of a few percent of the company’s workforce, acting in concert toward an ambitious common goal, can change an entire mature industry in less than two years,” the company writes in their downloadable OKR playbook on whatmatters.com.
Using OKRs instead of KPIs helps teams challenge themselves. This leads to more innovation within the company. It also helps employees feel more engaged by equipping them with the power to set and achieve the goals they designed.
For more information on the OKR framework, you can visit this link for Google’s guidelines.
Be Proactive About Communication
Most leaders using KPIs have an online dashboard or tracking system that provides insight into the progress and performance of their teams. Tools such as QuickScore help with the process of managing and sharing data, adding context, and visibly checking on the status of goal achievement. But numbers aren’t the only things managers and executives should check up on when using these resources.
Reaching out, recognizing work, and showing appreciation are all ways to keep employees feeling motivated and engaged. When tracking KPIs, also consider which teams or individuals might require more support. Don’t reserve these conversations for a quarterly employee review. Working on KPIs shouldn’t feel like an isolating process where there is no communication except when being measured against a target number. It should be a communicative, collaborative experience that takes workers’ feelings, opinions, and thoughts into consideration.
These conversations help employees and employers adapt strategies and objectives as needed. Opening lines of communication keep the plan relevant. It also helps business owners and executives celebrate contributions and care for their people’s needs as they work toward their goals.
Put Your People First
When we take the humanity out of a company and start pitting employees against numbers they don’t even have a say in, people suffer, disconnect, and disengage. By rethinking KPIs and adding on to what is measured, we account for factors beyond performance. In addition, working side by side with employees and creating a culture of contribution is another way people feel they have more ownership in the business. Considering other methods of measurement, such as OKRs, also help increase team autonomy and focus efforts on a collective goal. Finally, regular conversation, check-ins, and KPI reporting should occur throughout the goal achievement process to keep morale high and allow room for adaptation.
This isn’t to say businesses shouldn’t use KPIs and other kinds of metrics for analyzing performance and measuring goal achievement. Without tracking these factors, leaders fail in knowing how healthy their organization is as a whole. It’s an incredibly important part of business strategy, but metrics cannot lead an organization.
People lead people. A number can’t comfort someone when they’re having a bad day. It can’t celebrate someone for a job well done. It can’t build a trusting team or make someone love going to work. Only people can do these things. When an organization has servant leaders who lead from a place of taking care of their people first, the numbers will follow.
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