KPIsBy Paul Buck

Tim Kingston recently asked on the SCRIA Members Facebook Page,

“I am trying to work out how we know staff are efficient and providing quality and also how to let them know their strengths and weaknesses. What KPIs do you use?”

I responded with a few ideas and was then asked to write this article.

In a previous life, whilst working at the Department of Justice in Victoria, I did a lot of work and training on Continuous Improvement in Business and Key Performance Indicators for business and staff. I worked in a small team and trained by the now defunct Australian Quality Council. We were tasked with making a vast cultural change to the Enforcement Management Unit.

Done well, KPI’s will provide focus and incentive for your staff. Done poorly and you have a disaster in the making!

Tim Kingston asked for some examples of KPI’s from the group and whilst this is a great way to get some ideas happening, it is very wrong to think that you can graft someone else’s ideas into your business and make them work.

It is very true to say that each business is unique, and what will work for me in my business may be completely wrong for you in your business.

If you try to develop KPI’s in isolation, you will fail. There are no shortcuts and you will need to do the “hard yards” to get the desired results.

The most common mistake that managers make is to think that they can impose KPI’s on staff. It is very easy to forget that our staff are people too. People sulk, have temper tantrums, pout and do childish things when they’re not happy. As a business owner it’s our job to mentor, nurture and develop our staff and that we should never forget that our staff are essentially paid volunteers who choose to work for us and help us to achieve our goals and aspirations.

There are a number of things that need to be considered before you develop KPI’s and I’ll discuss these further below. But the absolute first thing you need to do is to get your staff involved and provide them with an incentive to accept and work towards the KPI’s.

KPI’s should form part of an employment contract or agreement between you and your staff members and for maximum “buy in” they should be linked to a reward program. It’s very common to link KPI’s with salary or end of year bonuses, but it’s not necessary to go to that extreme. You might consider linking them to a night out, some movie tickets, restaurant vouchers, a team building event, or maybe a desirable training event. The sky is the limit here and your financial position will dictate your budget. Remember KPI’s are designed to ensure you are making money and if you’re making more money then you should be prepared to invest a little back into your staff. You will need to sell the idea to your staff, so addressing the question “what’s in it for me?” right up front will go a long way toward addressing everyone’s natural resistance to change.

When developing KPI’s for staff, your KPI’s need to be both measurable and reflective of your companies mission and values. They can’t just be something that stands out there alone in the wilderness of “boss speak”!

KPI’s need to be relevant and tangible to the staff or you’re wasting your time.

I’d suggest that now, as the winter slow down starts to bite, is a great time to schedule a couple of afternoons with your staff and make use of slack time to invest in the development of your business. (Don’t try to do this in one go. I it can be overwhelming for everyone and you will definitely identify other areas in your business that can be improved upon. So keep focused but allow some time for constructive digression)

In my view, without wanting to make the task bigger than Ben Hur, there are a few things you need to do;

  1. Define and write down your, what we called, ‘’Mission, Vision and Values’’; what is it you do, where are you heading and what is culturally important to you, your staff and your business?
    1. Your Mission is what you do. And no, you don’t do floods or clean carpets! You do a lot more than that.
      Glen over at Jumbuck Carpet Cleaning has a Service Guarantee and in that Guarantee are some fantastic statements that, with a little work, could easily become the mission statement for his business. Take a look at
    2. Your Vision is where you want to go. I’d like to grow my business to a few trucks and six or so staff members, performing a range of services and restoration work, so my vision statement might reflect that. You no doubt will want something different, so your Vision Statement will reflect exactly that. Think in terms of “I’m at Point A now and I’d like to be at Point B. So how can I define Point B in one paragraph?’’.
    3. Your Values are your self-imposed rules, your moral compass, your social compass, and your views on faith. They are the things that define how your business interacts with your customers and society.
      Values are probably the hardest things to get your head around but as far as KPI’s go, they are key to providing the guidelines for your KPI’s. What is the acceptable manner in which my staff are going to go about achieving the desired KPI’s?
      Your Values should reflect your culture (or the culture you want in your business). Here are some key words to get you thinking: Honesty, Integrity, Safety, Professionalism, Courtesy, Environment, Sustainability, Profitability, Consideration, Tolerance, Understanding.
  2. Define and write down some very real goals. The big picture! Consider financial targets, cost reduction targets, conversion targets, staff retention targets- everything that is important to your business. If you have a five or ten year plan, pull it apart and find what’s important in it. Your Vision is the holistic statement, and this step fleshes out the nut’s and bolts of that Vision Statement.
  3. Define and write down the three to seven most important things and work out how you can measure those things. It’s well and good to say that you want to have more add-on sales or less staff on sick-leave. Now you really need to put some metrics on those things. How many add-on sales do you and your staff think they can achieve? How will you measure that?
  4. Once you’ve worked out how to measure them, you need to work out how you are going to achieve them within the parameters of your Mission, Vision and Values. This bit is really important because it’s the rules that you impose to achieve the targets. Think about profitability. If your KPI’s say “make more money” but has no method attached or guidelines, then a staff member who under/over services and overcharges will make more money in the short term but may damage your business in the long term.

So once you’ve worked all that out, you have a frame work to write your KPI’s. When you develop your KPI’s:

  • Make them short, meaningful and measurable. Three are just enough but seven is too many.
  • Your KPI’s need to be achievable as well as aspirational. If you’re going to this much work, then you need to make sure that there is an improvement in your business model, staff performance and bottom line. As a guideline, your top performers should be able to meet the KPI’s by the last day of your cycle. If they are meeting them by half way through the agreed cycle then you’ve set your metric too low.
  • Measure your KPI’s on a regular and ongoing basis. If you plan on only referring to them once or twice a year, then move on. You’ve already wasted enough of your time reading this far.
  • Initially, review your KPI’s on a monthly basis and make sure you have got your metrics right. If you need to alter your KPI’s then do it with your staff. Be upfront about it and be honest to yourself and your staff. It’s okay to finesse the KPI’s in the first few months of implementation but once you have a final product then don’t mess with it for another year. At the end of the year, buy your staff a pizza or two and set aside a few hours to “renegotiate” and improve the KPI’s
  • Unless you are linking KPI’s to salary then you need to reward regularly, fairly, transparently and with integrity. Don’t make it a competition between staff members. If everyone in the team achieves the KPI’s for the month, then everyone is rewarded. If no one does, then use the opportunity to work out why and fix the problem.

Once you’ve developed your KPI’s, put them proudly up on a wall just under your VMV’s and provide staff monthly feedback on how they are performing.

Done right, KPIs will really bring the team together and give them a focus with a tangible outcome for themselves. You get what you need – the metrics to know what your staff are achieving, an improvement in performance and also, hopefully, in your bank balance.