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Staff who are challenged with clear goals are logically going to be more motivated and satisfied. Learn how to set effective KPIs.

Lies, damn lies and statistics is a well-worn phrase that we often hear in the business or political press. Sometimes it’s attributed to Mark Twain, sometimes to Benjamin Disraeli. But in my view, whoever said it was wrong. Numbers don’t lie. Where you run into problems is in the interpretation of the numbers.

It is stating the obvious to say that numbers are critical in managing a business. Where would you be without transparency on your bottom line? But, what is often overlooked or underrated is the value of numbers in managing your single biggest asset: your staff.

Key performance indicators (KPIs) are essential. They help you to accurately measure performance so that you can benchmark activity in all aspects of your business, helping to identify the strengths and weaknesses of your staff and your business processes more generally. They can also help your staff retention: staff who are challenged with clear goals are logically going to be more motivated and satisfied. Importantly, KPIs can also help push forward your business by looking at where you need to be, whether in 12 months’ time or five years. When introducing KPIs,you need to stick by goals set. You can tweak as time advances, but remember to be realistic and ensure that targets are easily achievable.

Let’s take the example of a sales team. How can you expect your salespeople to hit target if they don’t know what they’re aiming for? How can you challenge staff if they don’t know what they are trying to achieve? It is pretty obvious really: you will not get the best out of your staff unless they know what they are trying to achieve.

How to set them

So, how do you set up useful KPIs? Essentially, you need a set of data which shows a pattern of activity over a period of time, which can then be used to set future benchmarks. Using the sales team example again, this might mean looking at the conversion rate on an individual and team basis and working back from there. This could include how many calls have converted to appointments; how many appointments were cancelled; how many appointments led to presentations and how many presentations resulted in sales.

Over a period of time, these figures will turn out to be remarkably consistent and will tell you exactly what you need to put into the top of the sales funnel to get the output that you need, i.e. your return on investment. You can then turn these into KPIs for your staff to measure their performance and challenge them to succeed. Remember to take the outliers out of the equation when interpreting data to establish KPIs. Individuals will have a very different conversion rate because of their expertise, experience and so on, once you review the numbers on a team basis, the conversion rate will become very consistent and then become useful information from which you can draw conclusions and set targets.

If assessed correctly, the KPIs that you establish will help you to identify the strong and weak individual performers, highlighting matters such as where there are training needs. They will also help you to understand how best to reward your staff. Do pay increases lead to increased performance against KPIs or are there other ways in which to incentivise achievement? You can trial different incentives to see how they work, giving you an invaluable insight into how to manage your staff to achieve your business goals.

Team performance

You can also use KPIs to develop team performance. To use an example, you might give an individual a KPI of a certain number of appointments in a week. A strong individual performer might achieve that target easily and then slack off, seeing no benefit in over-performing. If you have a team-based KPI, the strong performer should be appropriately incentivised to work with the weaker members of the team to achieve their collective goals.

KPIs don’t only apply to sales. You can use them to monitor all aspects of your business including service levels, client complaints, capability measures and work rates. Appropriately measured and targeted output will help you understand how many staff you need to complete a job and whether your staff are working to capacity.

The data that you capture will also help you to avoid claims for unfair dismissal in the event that you need to dismiss staff. Accurate data that reflects poor performance can be relied upon to justify dismissal on the basis of a person’s capacity. It will also be relevant in the unfortunate event of redundancies. Objective data can be used as the basis for a person’s selection for redundancy, helping you to manage the redundancy process fairly and ensuring that you dismiss the right people if the need arises.

The motivation factor

KPIs are a great way for staff to motivate themselves; they have something to strive for, goals to achieve. KPIs can also help employees work well in a group as well as individually. Remember to communicate KPIs to your workforce, hold regular meetings with your staff so they know how well they are doing or what they need to do differently to achieve targets.

Finally, if you remain in any doubt about the benefit of KPIs, you might be persuaded by the embarrassment that the German government recently suffered. Upon retirement, one of its civil servants sent a farewell message to 500 colleagues, telling them that that he had earned almost $1million dollars over the past 14 years without working. “Since 1998, I was present but not really there. So I’m going to be well prepared for retirement – Adieu,” he wrote, in an email leaked to the press. He accused the municipal authorities of creating inefficient, overlapping and parallel structures, even employing another surveying engineer to do the same job, leaving him with nothing to do. Perhaps they would have worked that out sooner if they had been monitoring his KPIs!

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Edward Mallett

Edward Mallett

Edward Mallett is MD of <a href="http://employsure.com.au/">Employsure</a>.

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