PERFORMANCE MANAGEMENT – THE GOLDEN THREAD
Performance management and KPIs
Performance management has become increasingly important and in today’s economic climate there is a constant pressure to deliver performance targets, to continuously improve and to ensure that employee’s perform to the very highest levels on a consistent basis to achieve the organisation’s goals. The alignment to organisational goals, also known as the Golden Thread, is essential if performance is to improve on a sustainable basis, yet it is so often overlooked.
In everyday speak this is called Performance Management, yet as a term it has become synoymous with redundancy, layoffs etc. Consequently, many staff dread their performance appraisal and often say they have little or no idea how their work contributes to the over-arching aims and objectives.
We are arguing that is this an opportunity lost and a little more time spent evaluating employee performance would yield a good return on investment. From our experience, what is often missing is the meaningful conversations throughout the year on the work of the employee, what they believe they have achieved, what do they think they could do differently and/or better, and what have they identified as their skills gaps. In real terms employees often do not know what they could be doing better until the day of the annual appraisal as nobody, including their manager, has had a conversation with them.
This is where key performance indicators or personal objectives can be used to very good effect; both at the organisational and individual level. So what is a Key Performance Indicator?
KEY PERFORMANCE INDICATORS
At the top level, a Key Performance Indicator (KPI) is a quantifiable metric that reflects how well an organisation is achieving its stated goals and objectives.
For example, if your vision includes improving customer service, then a KPI may target the decline in the number of recorded customer complaints received each month. By monitoring this, you can directly measure how well your organisation is meeting its long-term objective of providing superior customer service.
However, KPIs need to be worded carefully. Inappropriate wording can have an adverse effect or cause behaviours to become counter-productive. Take the above example: the target is to decrease the number of recorded customer complaints. The key here is ‘recorded’; staff could simply choose to not record the complaint, or your customer numbers could fall resulting in fewer recorded customer complaints. What the KPI masks though, is a more serious problem which in the long run could have an adverse impact on the financial stability of the organisation.
THE GOLDEN THREAD: EMPLOYEE GOALS AND KPIS
The critical component is to set goals with members of your team. This may be done within the formal annual review; however, this is not set in stone. Arguably, it can be done at any point in the year; the key is to make the KPI SMARTER (Specific, Measurable, Actionable, Realistic, Time bound, Evaluate and Review) and record it so it can be measured and monitored. The important point is that the goals set are aligned to the team strategy, the departmental strategy both of which are aligned with the overall strategy of the organisation.
In other words ‘What is measured gets done’. If you set a goal specific to a defined outcome, the chances of that outcome being delivered are much higher, simply because you have committed to managing and measuring the results.
See our blog:
APPRAISALS – EMPHASISE TIME FOR YOU
Individual KPIs articulated in terms of an organisational KPI, increases the recognition of what the employee is doing is well aligned with the goals of the organisation. This is essential if employees are to see the bigger picture and understand the value their individual contribution makes to the success of the organisation.
Let’s take the above example again, by way of illustration:
- ORGANISATIONAL VISION To have a first class reputation for customer service and satisfaction.
- ORGANISATIONAL OBJECTIVE To reduce the number of recorded customer complaints by 25%.
- ORGANISATIONAL KPI All recorded customer complaints to be resolved within five working days.
- INDIVIDUAL KPI To increase the number of satisfactory complaint resolutions by 33% this period.
SO HOW DO YOU SET MEANINGFUL KPIs?
This is not easy, and anyone who tells you it is, probably hasn’t understood the process. However, out top tip is to ask yourself the following questions to define your KPIs:
- What is the vision for the future?
- What is the strategy? How will the strategic vision be accomplished?
- What are the organisation’s strategic objectives? What needs to be done to keep moving in the strategic direction?
- What are the Critical Success Factors? Where should the focus be to achieve the vision?
- Which metrics will indicate that you are successfully pursuing your vision and strategy?
- How many metrics should you have? (Don’t be tempted to have endless measures!)
- How often should you measure?
- Who is accountable for the metric?
- How complex should the metric be?
- What should you use as a benchmark?
- How do you ensure the metrics reflect strategic drivers for organisational success?
- How could the metrics be manipulated, and how will you mitigate against this risk?
Just as you have set metrics for achievement, you also need to be cognisant of individual development. Overlooking employee development is one of the biggest demotivators present in any organisation.
KPIs: RECOGNITION AND DEVELOPMENT
Once you have agreed meaningful metrics for measuring organisational or employee performance in place, you need to also ensure that employee development is equally aligned.
How organisations do this varies from organisation to organisation however, not all employees will be motivated by extrinsic reward eg: bonuses. Many place a much higher value on intrinsic reward such as praise, recognition, opportunities for development.
Where possible align the intrinsic reward to an organisational KPI, for example, if one of the organisational KPIs is to improve talent management and succession planning, put your staff forward for different opportunities e.g. secondments, specific projects etc. Be careful of the message you send as you do not want the member of staff to think you are trying to manage them out of your team or indeed the organisation.
KPIs are metrics that link organisational vision with individual action. Look again at the pyramid and trace the journey from top to bottom.
To ensure that activities are in fact aligned with the organisation’s strategy, you need to focus on the individual employee’s contribution. This is achieved by setting SMARTER objectives and reviewing through the performance management framework. By applying the Golden Thread principle, you create a direct link between all of the key success factors that have been derived from the overall strategy. The result is that members of your team know what their individual contribution is, they understand what they have to do as expectations are clearly articulated and you have measurements for determining how well they are doing and how this ties to organisational success.