Managers, employees, and business owners all feel the pressure to do more with less, especially with the cut throat competition in the market. Employees are constantly coached by managers to do better, to meet their quotas, while managers are constantly pressured by higher ups to meet targets while decreasing costs. How do you hope to accomplish all these? The answer lies in improving your leadership skills and using key performance indicators (KPI) to track everyone’s progress.

It’s a given that most companies already measure employee and organizational performance through some sort of evaluation process. However, what’s missing from this process is the part where leaders closely evaluate the business process and the quantifiable metrics that could be used to measure its success. What use is a grading or appraisal system if it doesn’t measure the right things? What good is it if you know that employee A is hard working, if she’s not even working on the right things?

Identifying the correct metrics is important!

KPIs are important and they should be applied both for employee and organizational levels to ensure that every employee’s task contributes to the organization’s goal.  For instance, if a company sells medical equipment and their goal is to be the number one provider of medical equipment, then one obvious KPI is the number of sales the company has every week. By monitoring the number of sales made by each employee, the company can track how well everyone is contributing to the company’s goal. Unnecessary tasks and expenses could also be removed, based on the evaluations results.

On the other hand, if the KPI is not suited to the goal, the measured behavior may be of no use or counterproductive. For instance, using the goal mentioned earlier, another KPI might be the number of up-sells made. Yes, counting the up-sells will help you identify which employees are better at selling your products, but it won’t give you any hard data on the outliers who are having trouble making a sale. If you have no data regarding the outlier’s performance, how can you help them improve? In addition, the number of up-sells can’t be used to identify which of the leads the employees talked to actually bought a product.

Here’s a 5-Question Test to Identify the Right KPIs

1. Which quantifiable goals will measure if your team is actively pursuing the company’s long-term goals?
2. Given that you have enough data, how often should you measure these KPIs?
3. Who will be measured by these KPIs?
4. What should be a reasonable, yet challenging benchmark for success? 25% sales? 15% decrease in customer complaints? The target should be challenging enough for everyone to strive harder, but not so hard that everyone just gives up.
5. Can these metrics be cheated? What type of safeguards could you implement to prevent this?

As you can tell by now, using KPIs isn’t just about monitoring everything that you could put a percentage on. It’s crucial that you identify which metrics to track, so your team won’t waste valuable resources chasing the wrong goals. This is the important link between KPIs and great leadership skills.

© 2013 Incedo Group, LLC