Resources: Effective performance management needs objectives to be agreed and these will depend on clear and measurable business KPI’s

Performance management starts with setting clear goals and objectives! Read our Senior Consultant Gareth Jones blog about how defining clear KPI’s enables effective performance management in businesses.


Performance management starts with setting clear goals and objectives! Read our Senior Consultant Gareth Jones blog about how defining clear KPI’s enables effective performance management in businesses.

Synopsis

In this blog Gareth sets out:

  • The benefits of defining clear business KPI’s
  • How business KPI’s enable high-performance management in businesses and in business change
  • Key lessons learned on how to do this effectively.

KPI’s (key performance indicators) bring many benefits to a business, including:

  • Providing teams and individuals with a clear focus, to conserve energy for things that are most important to the business
  • Encourage collaboration and cross-functional team efforts, allowing teams to identify shared and common goals
  • Provide transparency, inspiring teams to drive high-performance outcomes and see the value they are adding to the business
  • Promote positive accountability, ensuring that teams stay on track and play their part

However, they also form a key ingredient of highly effective performance management.

Performance management starts with setting clear goals and objectives. In many instances your goals and objectives are going to be quantitative, meaning that you can identify a suitable KPI (metric) to track and measure how well you are progressing over time.  

Quantitative – A goal that is measurable by a metric.

Qualitative Measurement – A subjective goal that is measured through observation without metrics.

To achieve clear, quantitive, measurable goals, you first need to identify:

1.What is most important to your organisation/team/projects? 

2. How can you measure it?

Let’s look at an example where profit is a key objective for your business and improving operational efficiency through new ways of working is the approach that you have taken to achieve that objective…

  • Company A wants to grow profits by £Xm
  • Through their change agenda, they estimate that they can improve operational efficiency by X%, saving £Xm per annum in operating costs 
  • With this in mind, teams a, b and c within this company set their goals to contribute to this cost-saving
  • Team b has identified 3 key metrics in which they can align, track and measure their goals, they are:
    • Warehouse accuracy %
    • Despatch accuracy %
    • Quality control pass-rate %
  • In this example, these three metrics make up around 80% of the operational costs incurred by this team and they are proportionately high for an organisation of this size and in this market. 

So, for team b, focussing their goals on these three metrics will: 

1) Focus their efforts on the most important and valuable opportunities, aligned with company ambitions

2) Provide them with a clear, quantifiable metric to assess progress and business performance

This may sound straightforward, but there are several traps and pitfalls to avoid when defining which KPI’s to use. Below I have detailed some of the things you should watch out for and why you should take these steps to clearly define your KPI’s first if you want to get the best out of your performance management.

Don’t assume that it is clear to everyone what is “important” to the organisation – this takes time thorough analysis and collaboration to achieve. Taking your time to clearly define this from the top to the bottom will ensure a clear focus on a common goal, group-wide alignment and clearer accountability.

Don’t try to measure everything – it would be easy to look at every data point and assume that this is helpful, but this will lead to a lack of focus. Instead, try to identify 1-3 measures that best encapsulate the value you are trying to offer or achieve (as an organisation or as a team).   

A helpful tip here is to try overlaying the KPI’s to your business operating model, core business processes and value chain. Try to identify the 2-3 measures that will deliver 80% or more of the value you’re looking to achieve. 

For more information see our post here on the 4-stages of high-performance management:


Gareth Jones
Senior Consultant
Augere

For help with your business needs click below

Why not contact Gareth directly to chat through your performance management objectives – via email gareth.jones@augere.group or on his mobile: +44 (0)7435 621594 


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