Do you love KPIs? I suppose most likely not. It's hard to find someone who hasn't suffered from KPIs in one form or another: some have failed to meet their targets, some have faced subjective evaluations, and some have worked hard, left the company, yet never discovered what those very KPIs were that no one dared to mention. While it seems like a good idea: the indicator communicates the company's goal to you, you do everything to achieve it, and at the end of the month, you receive a bonus or some other reward. A transparent game, fair stakes. But no, KPIs have turned into a dreadful and inconvenient monster that time and again seeks to push lazy workers, while offering nothing to diligent employees. There’s something wrong with these indicators!
I hasten to inform you: if you don't like KPIs, it's simply because your company doesn't know how to implement them. Or you might be a developer.
When everyone in a company has been assigned the same KPI.
Disclaimer. This article represents the private opinion of an employee, which may or may not align with the company's position.
KPIs are necessary. Period.
To begin, I want to make a lyrical digression and state my position based on experience. KPIs are indeed necessary, and there are reasons for this.
In the context of remote, distributed, and otherwise self-isolated teams, KPIs are a way to delegate not only tasks to employees but also to assess their effectiveness. Each team member can see how quickly they are progressing toward the goal and adjust their workload, redistributing their efforts.
The weights of KPIs clearly demonstrate task priorities, and employees will no longer be able to only handle easy tasks or only those they enjoy.
KPIs provide a transparent and unambiguous direction for an employee within the company: you have a plan, and you work towards it. Choose the tools, methods, and approaches, but please strive to get as close as possible to the goal.
KPIs bring people together and introduce a small element of competition within the company. Healthy competition within the team drives the business towards profit.
Thanks to KPIs, the progress of each individual employee becomes visible, reducing tension within the team, and the evaluation of each person's work takes on an obvious, evidence-based form.
Of course, this is only relevant if the selected KPIs meet a number of requirements.
Where is the boundary of KPI normality?
Although this article represents a personal opinion, I would still like to point out the reasons for such a deep interest in the topic of KPIs. The fact is that in the release , a cool upgraded KPI calculation module has appeared: now in the , you can create indicators of any complexity with any ratings and weights. This is convenient and logical: the CRM records all actions and achievements (indicators) of each employee, and on their basis, KPI values are calculated. We have already written two extensive articles on this topic; they were academic and serious. This article will be harsh because companies treat KPIs like a carrot, a whip, a report, a formality, etc. Meanwhile, this is a management tool and a great way to measure results. But for some reason, everyone seems much happier to turn KPIs into a weapon of mass motivation destruction and a spirit suppression tool for employees.
So, KPIs must be measurable, accurate, and actionable—this is well known. However, it is rarely discussed that KPI indicators must primarily be adequate. Let’s break this down point by point.
This must not be a random set of indicators.
Indicators should be based on the business profile, company goals, and employee capabilities. All of this should be clearly outlined in the KPI system documentation (which you must make available to every employee). Prioritize achievable goals by establishing an importance category for each one using KPI weights, and develop individual indicators for each employee or for groups of employees. It is unacceptable if:
a) KPIs are interdependent, meaning the achievement of one employee's individual KPIs is influenced by the work of other employees (classics 1: a marketer brings leads, and their KPI is sales volume; if the sales department underachieves, marketing suffers, which cannot influence their colleagues; classics 2: a tester's KPIs include the speed of bug fixing, which they also have little control over.);
b) KPIs should not be blindly replicated across all employees ("let's apply the sales target KPIs to the entire development company"—this is unacceptable, while making overall achievement coefficients a basis for bonuses is quite feasible);
c) KPIs affect the quality of work, meaning that quantitative measurement could undermine qualitative assessment.
It shouldn't be a matrix with subjective evaluations.
I immediately recalled the KPI matrices from my first job—a celebration of meaninglessness and subjectivity, where employees literally got hit with twos for their behavior (a -2 for "company behavior" and a 70% reduction in bonuses). Yes, there are different types of KPIs: they can motivate or intimidate, be fulfilled or fabricated, make a business exceptionally successful, or ultimately sink it. The problem lies not in the KPIs themselves, but in the minds of the people who manage them. Subjective KPIs are those tied to "evaluative" characteristics such as: "willingness to help colleagues," "adherence to corporate ethics," "acceptance of corporate culture," "result orientation," and "positive thinking." These evaluations are a powerful tool in the hands of assessors, including the HR department. Unfortunately, the presence of such KPIs often turns the entire system into a weapon for corporate infighting, a method to bring in favored employees and distance those who are not (not all of them are bad employees).
Given the subjective evaluations in KPIs (which are usually a scoring system or a +/- scale), there is only one solution: they should not exist in any form. If you want to encourage personal qualities—implement gamification on the corporate portal, use virtual currency, stickers, wrappers, or even give out buttons. KPIs are about business goals and work. Do not allow the formation of a company culture with clearly delineated clans that fight more than they lead your company towards its established goals.
Small businesses need KPIs. Any business needs KPIs.
To be honest, I haven't often seen KPIs in small businesses; typically, the implementation of performance metrics starts with medium-sized businesses. In small businesses, there is usually only a sales plan and nothing more. This is detrimental because the company loses sight of performance indicators and the factors affecting them. A good combination for small businesses: + KPIs, as the data will be collected based on entered clients, deals, and events, and the coefficients will also be calculated automatically. This will not only streamline routine processes but also save time on filling out various reports. If you want to know how to make this combination affordable, convenient, and effective, (bonus inside) — we will get in touch with you.
KPIs are closely related to business processes.
Introducing KPIs against the backdrop of unoptimized processes is quite challenging because there is no systematic vision of goals and desired outcomes. Moreover, the lack of business processes within the company imposes numerous factors on work efficiency: missed deadlines, loss of accountability, blurred delegation, and shifting tasks to an employee who ‘carries the weight for everyone’ (and will only achieve KPIs related to being overwhelmed with tasks and exhaustion).
The optimal approach: review business processes (specifically review, as they actually exist in all companies but in various states) → establish in which to begin collecting all operational metrics → then automate business processes in the CRM → implement KPIs (preferably also within the CRM, so metrics are calculated automatically, and employees can see their progress and understand the components of their KPI system) → calculate KPIs and salaries automatically.
By the way, we have implemented all these steps in our RegionSoft CRM. Take a look at how we manage both simple and complex (advanced) KPIs. Of course, I don’t know the functionality of all CRMs worldwide, just a handful of 15-20 systems, but I can confidently say: the mechanism is unique. Alright, enough boasting; let's move on.
Basic KPI setup
Advanced KPI setup
This is the monitoring that employees of companies using RegionSoft CRM see in front of them. This convenient and clear dashboard allows them to evaluate their work progress and adjust their workday accordingly. The manager can also review the performance metrics of all employees and change the work tactics during the period if necessary.
It's possible to work excellently but not meet a single KPI.
This is primarily an issue for perfectionist employees who push their tasks to perfection and spend an inordinate amount of time on them. However, this situation is common to almost everyone: it's possible to provide excellent service to two clients who each bring in 2.5 million rubles, but still, not meet any service time standards. Interestingly, it is precisely "thanks to" such KPIs that we often receive inadequate services from advertising platforms, agencies, telecom operators, and other companies in high volume: they have metrics that determine bonuses, and it's more beneficial for them to complete a task than to delve into solving a problem. This creates a serious chain of errors because the KPIs of higher-level managers are tied to the KPIs of lower-level ones, and no one wants to heed requests to adjust the performance metrics. Which is a pity. If you find yourself in this situation, initiate a review, because sooner or later the pursuit of bonuses and coefficients will lead to a flood of customer complaints (which, of course, also has its own KPIs), making it much more unpleasant and complicated to fix.
For this reason, it is better to establish several types of KPIs, for example, a plan for the number of tickets (clients), revenue, revenue per client, etc. This way, you can see which part of the work brings the most income, which part is lagging, and why (for instance, a chronic failure to meet the plan for new clients could indicate weak marketing or weak sales; in this case, other reports such as the sales profile for the period and the sales funnel can assist you).
KPI is a summation of the period, not total control.
KPI is never about control. If your employees fill out daily/weekly spreadsheets indicating how much time each task took, that is not KPI. If your employees rate each other on a scale from -2 to +2, that is not KPI either. By the way, this isn't even control, because all tasks and their times are recorded arbitrarily, just to spread out 8 hours, and peer evaluations are given like this: "Oh, Vasya and Gosha were drinking beer with me, funny guys, I'll give them +2," "the incompetent Masha completed 4 big tasks for me, but she had such a crooked face, so I'll give her a 0, I’ll be lenient, not -2."
KPI is only an assessment of achieving or not achieving real measurable indicators that align with business goals. As soon as KPIs turn into a whip, they become a farce, because employees will only chase after the prettiest and most profitable metric, while real work on other fronts will be neglected.
KPIs should not torture employees.
It often happens that at the end of the month, employees receive large Excel files with 4-5 tabs where they must document their KPIs and fill out specific fields. A special form of torture:
documenting each of their tasks and assigning a score (psychologically, the arrogant slackers often outscore the self-critical modest ones);
rating colleagues;
evaluating the corporate spirit of the company;
calculating their coefficient, and if it's significantly above or below the average from previous periods, writing a justification in the comment section of the cell with the value explaining why it happened (and "I worked well because I got lucky" won't cut it) and a plan for addressing the issue moving forward ("I won’t work as well from now on").
I hope no one takes this real experience as a guide to action.
KPI should be visible, accessible, and transparent to employees, but workers should not lie when filling out tables, recalling their tasks, or reconstructing completed volumes based on documents and contracts. They should not independently calculate their metrics, etc. The year 2020 is worthy of automatic KPI calculations. Without automation, the key performance indicator system can be not just unreliable, but even harmful, as erroneous real decisions will be made based on fabricated numbers and scores.
KPI is not the entire motivation system, but only a part of it.
Perhaps the most common mistake is to think of KPI as the entire motivation system. To reiterate, it's merely a performance indicator. Yes, KPI includes elements of incentives and forms the basis for employee bonuses, but the motivation system is always a combination of monetary and non-monetary forms of rewards. This includes corporate culture, ease of work, relationships within the team, career growth opportunities, and more. It is possibly due to the conflation of these concepts that indicators of corporate spirit and mutual support end up in KPI. This, of course, is incorrect.
Moreover, I will now provoke a murmur of discontent among readers, but an important distinction between the motivation system and the KPI system is that motivation should be developed and implemented by HR specialists, while KPI is the responsibility of managers and department heads who fully understand both business goals and the key metrics for achieving them. If your company’s KPIs are set up by HR, your KPIs will look something like this:
Cute, but I have no idea what this is or how to replicate it.
KPI must be justified; numbers pulled from thin air will lead to conflicts.
If you know that your employees, on average, release two updates a month, fix 500 bugs, and sell to 200 clients, then a plan for 6 releases and 370 clients would be unrealistic — this is too large an increase in market share and too heavy a load on development (the number of bugs will also approximately triple). Similarly, you should not set a high revenue target if there is deep stagnation in the country and your industry is among the most stagnant. Deep underperformance against targets demotivates employees and makes them doubt themselves and the effectiveness of your management.
Therefore, KPIs must:
accurately reflect the business goals;
include only real metrics that exist and are measurable within the company in the calculation formula;
not contain subjective evaluations or characteristics;
reflect a reward vector rather than a punishment one;
correlate with actual performance values over several periods;
grow slowly;
change only if the goals or business processes change; legacy KPIs are a hundred times worse than legacy code.
If employees are upset about the KPIs and reasonably deny the possibility of meeting some indicators, it is worth listening to them: often, on the ground, certain aspects of achieving the target are much more noticeable than from a managerial perspective (but this mainly applies to medium and large businesses).
If the KPIs are inadequate, employees will eventually learn to adapt to them, leading to fraud or even outright deception. For example, this can lead to false connections under a single passport in telecommunications or fabricated customer evaluations in technical support. This does not bode well for the business.
There are no ready-made templates for KPIs.
You can find offers for the sale of ready-made KPI sets online and with consultants. In 90% of cases, these are the same Excel files I mentioned earlier, but they essentially represent a plan-fact analysis for any company. They will not include the metrics that align with your goals and objectives. Such files are simply lead magnets to encourage you to consult an expert for developing a KPI system. Therefore, I highly recommend against using someone else's templates for calculating key performance indicators for your employees. After all, they are key, not singular or universal.
Yes, developing a KPI system takes time, but once it's done, you'll save yourself from a lot of problems with employees and will be able to manage both the office team and remote workers equally.
There shouldn't be many KPI metrics.
Ideally, there should be between 3 and 10. A large number of KPIs dilutes employees' focus on objectives and decreases work effectiveness. Particularly ineffective are trivial, routine KPIs that are tied not to macro-processes but to the number of contract pages, text lines, character counts, etc. (this thesis can be illustrated by the concept of 'Indian coding' or 'Glitch', when in India in the mid-80s programmers were paid by the number of lines of code written. This led to a decline in code quality, making it spaghetti code, non-object-oriented, and full of bugs).
Some KPI metrics should relate to the individual work of an employee or department, while others should be integral, common to the entire company (for example, the number of bugs found is an individual metric, while revenue is an achievement of all departments collectively). This way, employees are conveyed the correct objectives of the company, and they recognize that there is parity between individual and team work within the company.
Yes, there are indeed professions where it is difficult or even impossible to apply KPIs.
These are primarily creative professions, such as developers, programmers, researchers, scientists, etc. Their work is difficult to measure in hours or lines because it involves highly intellectual efforts tied to deeply understanding the task details, etc. Motivational KPIs can be applied to such employees, for instance, providing bonuses if the company meets its revenue plan, but individual coefficients for them are a highly debatable and challenging solution.
To understand the real consequences of introducing KPIs for such professions, look at the state of outpatient care in our country (and beyond). Since doctors were given norms for the time spent per patient, filling out documentation, and other valuable guidelines for interacting with patients, public clinics have turned into branches of hell. In this regard, private clinics have proven to be much more competent, as they set KPIs while allowing ample time for patients, primarily focusing on patient loyalty and even love for the clinic and specific doctors. With this approach, the revenue and visitation plans will be met automatically.
An employee comes to a company to exchange their knowledge and experience for money, and their knowledge and experience should yield certain results based on the business's goals. Setting KPIs for them is not something negative, disloyal, or unscrupulous. On the contrary, with a well-developed KPI system, the employee sees the direction in which they need to move and can choose where their experience will be most applicable and their work most productive.
Unfortunately, KPIs are not the only entity that has been demonized in the business environment and turned into a tool of intimidation. This is incorrect, as KPIs, like CRM, ERP, and Gantt charts, are simply convenient management and dialogue tools for employees and their leaders. KPIs work well when they are sensible. Therefore, everything is in your hands. Personally, I see an ideal combination of CRM, sales automation, and automated KPIs for small and medium-sized businesses. Now, in the face of COVID-related economic uncertainty, this combination can literally reconfigure the team and restart the business. And why not?
Source: habr.com
