Enhancing the Effectiveness of Key Performance Indicators

Key performance indicators are commonly referred to and used in organisations. As eluded by the name; performance indicators are the “litmus test” for performance. While a considerable number of managers believe in their watchful eyes, key performance indicators, when properly used, often reflect directly on the results being delivered - something all managers want.    

Key performance Indicators are used to measure performance. Often used by organisations to evaluate the success of various activities, KPIs can be used to measure periodic achievements of operational goals or to evaluate progress toward strategic goals. 

As simple and straightforward as it might seem to set key performance indicators there are often many pitfalls that businesses stumble into when setting key performance indicators. It is therefore crucial to ensure that the following flaws are avoided.

Using outdated KPIs

Missions of companies rarely change and business models are rather static but processes and tactics employed to achieve strategies are frequently altered. Ever-changing business landscapes and the emergence of competition calls for the constant upgrade of approaches and tactics. Furthermore, the role technology plays in the workplace has evolved exponentially in the past couple of years. All these factors affect the roles that are assigned to employees and their performance requirements. It is therefore crucial that KPIs are constantly updated, assessed and readjusted.    

Not measuring the right processes

KPIs can be assigned to almost any activity that employees carry out. While it is crucial to measure employee performance it is more important to ensure that the right processes are being measured. Essentially, strategies need to be closely examined. The core processes that form the business strategy and help sustain a business’s competitive advantages must then be extracted. Accordingly the fundamental activities that contribute to these processes are then determined. It is only then that KPIs can be assigned to these very processes to ensure that the performance of employees is bench-marked.  

The KPIs used are directly linked to performance

Unfortunately it is not uncommon for KPIs to be too generalised. Management often fail to choose KPIs that single out the performance of certain departments or employees. KPIs that measure the performance of employees based on deliverables that are not directly under the employee’s area of control are inaccurate. Employees often collaborate with other internal departments or external parties to produce deliverables. KPIs need to be accurate enough to measure the input of an employee or selected group of employees without taking into account the input from other sources that are not being examined.

Rather than using KPIs to reprimand employees, KPIs should be viewed by organisations as tools to help improve the performance of staff and ultimately the organisation as a whole. Poor performance doesn’t necessarily indicate employees that are careless but could be symptoms of other underlying problems such as inefficient processes or possible training deficiencies.

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