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Eight (well, nine and a half...) tips for great KPIs for all your team.

February 21, 2019

 

 

“My KPIs were just handed to me. There wasn’t any discussion about them”.

 

“They don’t really seem to fit with the job I’m actually doing. There’s no link to what I think I’m expected to achieve”.

 

“My KPIs haven’t changed for maybe two years. But my job has. A lot.”

 

 

These are quotes from team members in businesses we’ve worked with. If they sound a little familiar, you’re in good company - our experience suggests a high proportion of employees in Australian businesses are less than convinced their KPIs are particularly meaningful.

 

It doesn’t have to be that way of course. And really, it shouldn’t be that way…

 

First up, why bother?

 

Fair question.

 

For those who are interested, it seems the term “Key Performance Indicator” found its way into the business lexicon sometime in the early 1900s. Who knew?

 

The application of KPIs became more entrenched in business with the advent of the balanced scorecard in the 1950s.

 

I suspect that like many things in business, KPIs exist today largely because nobody has invented an alternative that works. Whatever the reason, they’re the methodology most businesses use to track how things are going.

 

Or do they?

 

In an ideal world, KPIs are a way to track and measure the “mission-critical” (oh, how I hate that term but right now I can’t think of a better one…) activities and projects in a business.

 

We spend the time on KPIs because we think it’s going to guide the business and the people in it to desired outcomes. 

 

That’s why we bother….

 

Here’s how you can create KPIs in your business that your team members will find not only useful but that will enhance team engagement and, ultimately, productivity in your business.

 

Co-authoring.

 

This is one of the basics. In fact, we reckon it’s so important that if you get it wrong, it'll let down the whole process, even if you get everything else right. 

 

By “co-authoring” we of course mean making sure your team members have meaningful input to the KPIs for their roles.

 

There’s a couple of ways to get this wrong (apart from not having KPIs at all).

 

The first way is to simply write a whole bunch of KPIs for every role in the business then hand them to the individual concerned with a “there you go…let’s talk at the end of the year to see how things went”. 

 

The second is to sit with each team member and jointly agree some draft KPIs. Which sounds like a good start. But after that conversation, you present them with your own version of what you think you agreed which actually bears little or no resemblance to your team member’s view on the matter.

 

Engaged employees as a result of those two approaches? We think probably not….

 

KPIs that work as nature intended are the result of discussion, negotiation, expectation management and maybe some compromise from both sides leading to agreement on what those KPIs ought to be.

 

So tip one?

 

While there’ll always be some non-negotiables, make KPI setting a truly collaborative exercise.

 

Give them context (part one).

 

As important as it is, collaboration on its own doesn’t guarantee a great outcome. 

 

Even KPIs that emerge from a very collaborative process run the risk of becoming not much more than a list of “things to do”. Team members will treat them as tasks that have no greater meaning than simply getting a job done.

 

It’s no secret that the most engaged employees in any business are those who have a sense that their role contributes to a bigger picture and who understand where the business is heading and why.

 

And engaged employees are more likely to deliver “discretionary effort” over and above what their role and KPIs call for.

 

That understanding of bigger picture issues doesn’t happen on its own.

 

In businesses where teams “get” strategy and understand how their role plays a part in its execution, there’s a concerted and consistent effort by leaders to communicate, communicate and communicate some more. You can read more about this aspect here

 

Tip two…

 

Make sure your team members “get” the strategic context to which their KPIs relate.

 

How?

 

If possible, involve them directly in the strategic planning process. Where the size of the business or other factors preclude this, put in place a communications plan to help bring that strategy to life in the minds of your team. Most importantly, make your leaders absolutely accountable for implementing that plan.

 

Give them context (part two).

 

Re-read the tip above, and wherever you see the word “strategy” above, substitute “business plans”.

 

Because people in your teams need to understand both.

 

Where strategy provides the longer term, big picture context, business plans give team members the shorter term perspective - how their day-to-day activity contributes to the success of the business. 

 

Again, this is about making KPIs more than just a task list that's no more engaging than checking off your shopping list.

 

So tip three...

 

...is simply tip two all over again, but focused on business plans.

 

Focus on outcomes.

 

This might seem obvious but it’s amazing how often we see KPIs that only vaguely relate to the result required from them - rather, they focus on the how rather than the what

 

As a simple example, think about a KPI focused on customer service. Most businesses want to keep their customers happy, naturally. So to do that, a business might load up its team with KPIs requiring them to phone their customers once a month to check in. 

 

Which might be fine. But maybe not.

 

Instead, what if the business measured the performance of team members with customer service responsibilities by measuring an outcome: customer satisfaction (customer feedback by way of short surveys is a good way to measure satisfaction).

 

The point here is that the number of phone calls is an input. Some customers might love them, but others may find them intrusive. Without measuring satisfaction, you’ll never know. 

 

Focusing on outcomes rather than inputs also gives your team members a degree of autonomy - you’re being specific about what you want done rather than how you want them to do it.

 

By doing so, you free up your team members to think for themselves which often brings process and other improvements into your business.

 

After all, it’s the people in a role who are closest to it and therefore likely to come up with a “better mousetrap”.

 

Measuring performance based on how they do what they do will inevitably inhibit change.

 

Taking our customer service example another step, if someone’s performance is all about the number of calls, they’re hardly going to stop and get customer feedback along the way. As long as they make the number of calls required in their KPI, that’s a job well done.

 

Right? 

 

Hmm….maybe not.

 

Tip four then?

 

Frame KPIs around what a successful result looks like…not activity that might or might not lead to a desired outcome.

 

Make them controllable.

 

There’s nothing worse than being held accountable for outcomes you can’t control is there? 

 

Yet this is a concept frequently ignored when it comes to drawing up KPIs. The warning sign is when words like “contribute to…” and “influence…” which aren’t indicative of real control over any outcome whatsoever. They also suggest real difficulty in measuring success.

 

The conversation you wind up having with a team member with this type of quite vague KPI will go something like this…

 

You: “Tell me about your contribution to project X."

       

Team member: “I went to meeting after meeting, made what I thought were reasonable suggestions but they were all ignored.”

       

You: “I’m going to have to rate you quite low against that KPI then. Nothing much was achieved.”

       

Team member: “That’s not fair. I did what I thought was expected. I made my contribution, and I can’t help it if nothing came of it. It was totally out of my control”

 

Or something like that. You get the drift.

 

Tip five...

 

Make sure you examine every KPI that you agree with your team member to also ensure and agree he or she can control the outcome (barring totally unforeseen circumstances).

 

Avoid the wishy washy words we mentioned above and others like them in favour of wording that points to a specific result that needs to be achieved.

 

Taking the customer service example, if you insist on your team member making a specific number of calls a week, then involve an outcome…include a requirement to seek, record and report client feedback on service standards. 

 

Make them reasonable.

 

This one’s simple….

 

Don’t make KPIs so “stretch” as to be all but impossible to achieve and therefore most likely completely demotivating.

 

This is one where collaboration is critical.

 

There’s no doubt there’ll be an initial difference of opinion as to what constitutes “reasonable” so be prepared for a bit of robust discussion. Be prepared also to compromise. Again, recognise and agree there are some non-negotiables but be prepared for some give and take.

 

So that’s tip six, pure and simple...

 

Be reasonable.

 

Include KPIs that relate to professional development.

 

Give your team the opportunity (but not necessarily the obligation) to identify and undertake professional development opportunities that will benefit both them and the business.

 

These could relate to undertaking additional study or short courses to enhance existing skills or acquire new ones. They could also be as simple as formalising opportunities to work in other areas of the business to build those skills and improve understanding of what goes on across the business.

 

Don’t, though, force development on individuals who don’t, for whatever reason, wish to pursue it either for the time being, or ever.

 

There’s often good reasons why this is the case. Forcing the issue will create resentment rather than goodwill. 

 

Which is tip seven...

 

Make sure, with an appropriate KPI, that those who want to develop themselves are given the opportunity, and their progress is measured.

 

Building in a development KPI makes development a two-way street - it means the individual is being measured on undertaking appropriate and relevant development and it puts something of an obligation on the business to help facilitate that development (as it should).

 

Include KPIs that create collaboration.

 

It’s somewhat surprising how infrequently we see this in businesses.

 

And it’s simple.

 

Many initiatives a business wants and needs to see successful rely on team members from cross-functional areas to work together to make it happen.

 

If you know this to be the case, don’t make it difficult for those involved…don’t leave it to them to work it out for themselves. Instead, be specific. “Work with a nominated representative from XYZ Department to complete Project Snowcone” leaves no doubt that there’s an expectation of collaboration and why it’s expected.

 

Tip eight:

 

Collaboration will only rarely happen spontaneously. Other times it needs to be driven with appropriate KPIs. Don’t leave it to chance.

 

A final word on context...

 

Tips one and two are about strategy and business planning.

 

Just as business plans reflect strategic priorities (at least they should do that), strategy itself is (or should be) directly evolved from your business purpose and vision.

 

We’ve written a mile of material on this and why it’s important so we’ll leave you to check out some of our previous posts.

 

So not only should KPIs clearly relate to business plans and to strategy, but also to the much bigger picture items - purpose and vision.

 

Ask yourself if this is the case for each KPI for every team member in every team in the business. If the answer is “no” or “not sure”, review and revise until the answer is an emphatic “yes”. If you can’t get to that point, you really need to ask whether the KPI should exist at all.

 

It’s a tough one, but an exercise that comes with benefits to team and customer engagement and, ultimately, the bottom line of the business.

 

What about KPIs in your business?

 

Nothing here is rocket science but sometimes in our haste to get things done we settle for "near enough is good enough".

 

We reckon you do that with KPIs at your peril.

 

Meaningful KPIs, focused on controllable outcomes and created in a collaborative way have a positive impact on engagement in your team. And the impact of engaged teams on customer satisfaction and business success is well researched and documented.

 

Creating great KPIs is an activity that's well worth the investment in time and effort.

 

Why not give BusinessBlades a call?

 

We're not going to write you team KPIs for you. In fact we don't think it's a job that can ever be successfully outsourced.

 

What we will do, though, is work with you to make sure your business purpose, your vision, strategy and business plans all work together to build a relatable story about your business.

 

That done, your KPIs may need a review to ensure they link clearly to that story in a way that's meaningful to your teams right across your business.

 

No easy task necessarily, but we're up for it if you are.

 

So give us a call or drop us a note - we can't think of a good reason you shouldn't chat to us, or a better time to do it than right now!

 

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