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What Are KPIs?

Managing employee performance and the daily operations of a business is hard work. Developing individual employee Key Performance Indicators (KPIs) can assist in tracking the ability for your employees to meet their expectations and their impact on the business more broadly.

Well-drafted KPIs are more than just goals, they are a means to assess and manage employee performance, a tool to meet business outcomes, review business health and growth, a way of identifying new opportunities for the business.

At an employee level, they can be used to measure and manage underperforming staff members, structure incentive payments such as bonuses, and also identify training opportunities to upskill the workforce.

Setting KPIs

Each business has KPIs relevant to their specific industry. Depending on the size of your business, the KPIs could involve the overall performance of the business or smaller tasks related to each department such as sales, marketing, finance, and customer service.

The key to setting KPIs is to identify desired outcomes for the business, and isolate means and ways employees can meaningfully help to achieve these outcomes. Whether it be increasing profit, reducing costs or acquiring a certain number of new customers, the KPIs must relate to specific business outcomes.

Using the SMART criteria is an effective way to assess the relevance of a KPI and save time on chasing less important objectives.

Each letter outlines certain criteria the KPI should meet:

  • Specific: Is the objective specific enough?
  • Measurable: Can the progress be easily measured?
  • Attainable: How realistic is the goal?
  • Relevant: Is the goal relevant to the needs of the business?
  • Time-frame: How much time is needed to achieve the goal?

For example, the business owner of a bicycle shop may set the following KPIs for their employees: 1,000 bicycle sales per month, increase customer satisfaction by 10% within a financial quarter, increase total number of customers by 5% each financial quarter, and increase total revenue from bicycle accessories by 25% in the financial year.

Below are some other common examples of KPIs found in different industries:

  • increase number of leads and prospects
  • cost per lead through each channel
  • level of customer engagement
  • average value of purchases
  • number of abandoned shopping carts for an e-commerce website
  • monthly sales quota
  • number of returned goods and warranties
  • types of products/services used every day

Using KPIs

A KPI is only as good as its ability to measure employee performance and to deliver real outcomes via managing underperforming employees. This will often mean the business will be required to conduct regular performance review meetings with employees to communicate the areas that have been identified for improvement.

The benefit of having KPIs means employees are aware of what outputs or outcomes need to occur to satisfy their employer’s expectations. Should the employee continuously fail to meet their KPIs it is recommended the business should actively manage their performance with on-going training and performance improvement plans.

Employsure can advise you on implementing and managing KPIs in your workplace. To find out more, you can call Employsure any time and any day on 1300 651 415.

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