Key Performance Indicators (KPI)

Job descriptions explain the duties of a job to an employee but how do you ensure that the employee is completing these duties at the level of performance required to ensure success in the job as well as contributing positively to the company? Key Performance Indicators or KPI’s attached to the job description provide that quantifiable measure. The job description tells employees what they have to do and KPI’s tell them how well they have to do it.

The KPI’s should be designed to reflect the overall objectives of a business and its key drivers. If a core competency of a business is it’s ability to service customers better than its competitors then one KPI could be 98% customer satisfaction, or level of service delivery as measured through customer surveys.

In setting Key Performance Indicators be careful not to mix actions with results. For example a sales representative’s action may be to visit clients in a given territory to promote a company’s products or services. KPI’s would set the number of visits to existing customers or new contacts required during a given period, the number of sales closed or dollar value of product sold.

A customer service person’s action may be answering customer queries and the performance might be quantified in terms of the length of a call, the number of calls abandoned before being answered or the number of calls waiting in a queue. A receptionist answers the phone with the objective of presenting a professional image for your company so you might fix a KPI of answering each call within three rings.

Each KPI should have a title, a definition, a method of evaluation and a stated target to aim for. For that sales representative you might want to measure the increase in sales. Simply asking for an “increase in sales” won’t work unless you are clear about how this will be defined, is it the number of products sold or contracts signed over a given period or is it the overall value. Then provide the number you expect.

Many duties your employees undertake are measurable but are they key to your company’s success. When setting Key Performance Indicators, ensure that the individuals KPI’s reflect the company’s overall KPI’s. Limit them to those factors that are essential to the employee reaching his or her goals and keep to a small number so that the employee can focus on achieving them.

There could be up to seven critical elements in an employee’s job. These are duties of such importance, or such a large part of the overall role, that an unacceptable performance would have significant impact on the business. Identify these accomplishments, select which measure to use and then assign weights or priorities.

A company goal may be to out perform customer expectations on delivery of product. The Key Performance Indicator could be defined as "the number of parcels delivered within the expected time frame as a percentage of total parcels delivered" and a way to measure it has been set up by collecting the information in a scanning system. The target could then be "Deliver 97% of parcels prior to expected delivery time.” Or “Reduce the number of late deliveries by 5% per year." These are clear targets that everyone will understand and be able to take specific action to accomplish.

Examples of KPI’s could be:

  1. No more than 4 valid customer complaints per year, as determined by the supervisor
  2. No more than 3 errors per quarter, as spotted by the supervisor
  3. No more than 5 orders per year (processed later than 10 working days from receipt)

Don’t forget to give effective and timely feedback and address employee’s performance. People need to know how they are doing, what is working, and what is not working. Feedback works best when it relates to specific KPI’s as they provide a structured appraisal system which can help employees feel good about their work and can provide an opportunity to discuss any weaknesses or problems and help identify solutions.

Telling employees that they are doing well because they exceeded their goal by 5 percent is more effective than simply saying “you're doing a good job.”

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