Keys To KPI Optimization
When you judge the performance of a company, department, or employee, you look for objective measures. Leaders and managers don’t want to have to rely on their intuition and observation to decide whether an employee or work group has met the most important goals. Key performance indicators (KPIs) give companies an objective, organized way to ensure everyone is successfully working toward the same goals, and that each department and individual is effective.
Here is how five Training Top 125 companies are using KPIs to turn their workforces into powerhouses laser-focused on corporate goals.
The Ultimate Measure Is the Customer
Like other metrics used to measure company and employee performance, KPIs aim to increase customer satisfaction and loyalty. If your customers or clients don’t feel they are being well-served, then what other measures matter? They will drop off and stop referring your products and services to others.
At AAA, a customer-centric approach is taken toward the use of KPIs. “We are a business of businesses, so KPIs vary among our diverse business lines. However, one KPI that is consistent among the majority of our business lines is our Member Satisfaction scores,” says Organizational Development Leader Jacob Belakonis. “At AAA, we exist for our members and judge everything we do by how well we meet their needs. If one business line is not meeting expectations with member satisfaction, our ability to add new members and retain existing members is negatively impacted. Due to this focus on member service, our Member Satisfaction scores are a critical component of every major business line in our organization.”
The way to make the most of a KPI, such as member satisfaction scores, is to clearly communicate expectations to employees. They need to know this is an essential metric, and the level at which they are expected to perform in relation to the metric. “Establishing and communicating KPIs is an important first step directly related to employee performance. If employees are not aware of how their performance is measured, or how it impacts the organization, they are most likely not performing at the level required,” says Belakonis. “Once KPIs are established, communicated, and understood by employees, measuring employees against KPIs becomes more impactful. Measuring employee performance relative to KPIs provides insight into who is exceeding, meeting, or below expectations. From there, a deeper dive into performance will help identify successful skills, behaviors, and best practices required to meet and exceed expectations. This can lead to a variety of solutions such as formal/informal training, coaching sessions, or enhanced communication, recognition, and accountability, to name a few.”
At Signature Consultants, KPIs measure the level of connection between the sales force and clients, says Conrad Charles, director of Training and Development. “Recontacting is a key measure of how well we are doing. We know we are fulfilling the promise of our relationship-based business model by increasing our Recontacting KPI. Through training, managers holding accountability, and with some cheerleading from our CEO, we took our Recontacting from 65 percent to more than 90 percent.”
While KPIs have helped Signature gain insight and drive results, Charles says they should be used judiciously. “We have learned that too many KPIs can cause salespeople to lose focus. We had to determine which KPIs were key to leading people to success and which KPIs to use as guides in identifying gaps. We’ve put together a well-defined model that helps us sustain value to customers and develop our sales team day to day.”
Focus on Employee Efficiency and Effectiveness
At SE2, KPIs are used to track the competencies the company’s leaders believe are most important to the organization’s success. “We have a set of standard KPI-focused competencies that are organization-wide. These are the foundation of our culture at SE2,” says Director of Learning and Development Rich Maley. “ARTIC stands for Accountability, Responsiveness, Transparency, Innovation, and Collaboration. Each role within the organization has specific KPIs tied to these competencies. Then we have very specific KPIs tied to specific roles.” As an example, Maley notes that someone working in the company’s call center might be expected to answer a certain number of calls per day, with each call taking no more than a particular amount of time, and callers not having to wait any more than a maximum amount of time to get their call answered.
Tracking KPIs gives the Learning team the ability to spot patterns in training needs, so learning and development programs can be fine-tuned. “KPI data simply give you a snapshot of current performance levels. In the past, we have used this data to trend our learning efforts toward certain competencies and skills,” Maley says. “For example, we were seeing low KPIs around internal stakeholder satisfaction ratings. Given this, we created an organization-wide program around professionalism to help trend those numbers in the right direction.”
In addition, the company can identify correlations that link to strong employee performance. “We look at organizational KPIs and look to see possible correlation trends from a learning and development perspective,” Maley explains.
“For example, if we can show that the top 20 percent performing business analysts within the organization (based on Talent Assessment metrics) are also in the top 20 percent of our training consumption group, we can start to draw parallels between these two key metrics. We can even take that further and look at specific program alignment with specific competencies. For example: If 10 percent of the top 20 percent performers engaged in the ‘Leaders@Change’ program, and these same individuals rate high in the ‘Change Management’ competency, we can start to make assumptions in regard to the success of a specific program.”
Keying Into Profitability
KPIs can be an excellent way of making sure the company is meeting, or exceeding, profitability goals. “We use a series of ‘leading indicators’ that, when achieved, yield a higher net operating income (NOI) to our clients. Our leading indicators are in five areas: Investment Results, Sales, Service, Customer Experience, and Compliance,” says Topher Olsen, senior director of Learning & Development at Alliance Residential Company. “For the Sales category, the Leading Indicator is Property Occupancy. This is a measurement that is budgeted for by our community managers. In addition to this Leading Indicator, we have several ‘supporting KPIs’ that are reviewed when associates aren’t meeting the Leading Indicator. These include: Closing Ratio, Call Conversion, Follow-Up Percentage, and Leads-to-Lease.”
The five leading indicators used by Alliance Residential are tied directly to profitability, so when a property managed by the company is doing well in those indicators, there are also greater profits being generated. “We call this our 5 Star program as we are measuring effectiveness in these five areas. We have proven that when sites achieve four to five stars, they are, in fact, yielding higher returns for our clients,” says Olsen. “At the corporate level, each department—HR, Talent, Accounting, Asset Engineering, IT, Marketing, etc.—has a unique set of KPIs applicable for that department. For Learning and Development, for example, we measure participation in some of our partner certifications, 90-day turnover, speed to proficiency, and overall engagement.”
- Measure how well your customers think you’re doing. The performance of a company, group of employees, or individual employee can best be judged by those you serve.
- Gauge the link between salespeople and customers. You can use a “reconnection,” or “reactivation” metric to measure how well your sales team is connecting, and reconnecting, with your customers.
- Use key performance indicators (KPIs) judiciously. Too many can confuse employees, so they don’t know which metrics, or areas of performance improvement, are most important to focus on.
- Look at efficiency, such as how many calls per hour a call center employee is taking, how long each call takes to resolve, and how long callers have to wait to have their call answered.
- Use KPIs to spot correlations in training program completion and high performance. You might notice that employees who have completed a particular program are meeting their KPIs more than other employees.
- Be sure the KPIs you establish are directly linked to profitability, so that when employees, or a group of employees, are scoring high on those KPIs, there also is higher profitability for the projects that group of employees has produced.
Customize a performance assessment instrument to look specifically at your company’s KPIs.
KPIs as Motivational Tools
The KPI, or Key Performance Indicator, is often one of the most feared acronyms in the business world, second only to the dreaded PIP (Performance Improvement Plan). Words matter, and while there is nothing inherently wrong with the use of KPIs, how a company, and each individual within the company, defines the acronym will determine if it is seen in a positive light or as a hammer.
Here are a few tips on how best to keep the KPI from becoming a weapon for evil and instead making it a motivational tool:
Keep it simple: One of the biggest errors made by organizations and managers is the over-complication of KPIs. Too many KPIs eventually will validate the old saying, “When everything is important, nothing is important.” And when KPIs are overly complex, employees tend to get frustrated. For each strategic project or department or individual, measuring not more than five KPIs will deliver the greatest results.
Position strategically: It may sound obvious, but if a KPI is not aligned directly with the strategic initiatives you are attempting to accomplish, the efforts will be wasted. With the abundance of data available to organizations, the tendency to include too many measures, as noted above, also can lead to misalignment with what really matters. Ask how each KPI will not just drive employee performance, but more specifically, how the KPI will drive employee performance, which, in turn, will correlate to more profit, fewer customer complaints, faster customer response, or any other strategic initiative.
Involve the participant: Have you ever attended a meeting you were not involved in planning? We all have. Generally, we participate actively but hope we are not assigned any tasks. But if everyone on the team is involved in planning the meeting, everyone is expecting to be a part of the action items. KPIs are no different. If you want to truly drive performance in an organization, department, or individual, seek and incorporate stakeholder feedback. Don’t make the KPIs only about what you want to accomplish. Make it about what that team or person believes can be accomplished. Study after study has demonstrated that intrinsic motivation (employee directed) will always produce better long-term results than purely extrinsic motivation (company/manager directed).
This year, keep your KPIs simple, position each one strategically, and actively seek input from each participant. If done effectively, there will be no need for that silly PIP.
Learning Guidance to Achieving Performance Expectations
Most people take learning for granted. Today’s organizations expect more from learning—and seek to use learning to leverage, manage, and mitigate a variety of changing business preoccupations.
Leaders group these preoccupations under risk, change, and performance. This is where learning plays a significant role, but not for the reasons you believe. While many in the field see the act of learning as their objective, operational leaders consider learning one of many means to achieving an end result.
Accepting their perspective is the first step to demonstrate learning value. Next is ensuring your learning efforts actually deliver the tangible value leaders expect. But what is the value they seek and how do you go about showing it?
The expected and most direct impact your learning effort can make is improving performance. Leaders see a direct correlation between the two. Most learning practitioners, however, struggle to show improvement in employee performance. Stop focusing on employee learning (Kirkpatrick Level 2) and start measuring and monitoring job performance (Level 3) and operational outcomes (Level 4).
Every operational leader must meet key performance metrics or indicators (KPIs). These KPIs directly align to specific job tasks and, hence, specific employee skills. How do you find these KPIs? Learn about the operational need you’re addressing. Get to know their business, not just what you or the client believes is the training need. Then ask what their performance expectations are.
Where else can you find these KPIs? Almost every organization has a performance management system/framework. At its highest level, it shows strategic-level KPIs. More relevant for training are the KPIs broken down, or cascaded, to each operational level and then ultimately down to the department. Most progressive organizations develop related KPIs to every job role.
Once you isolate the KPIs, pull out your best skills gap and needs analysis. With KPIs in mind, reverse engineer the needs analysis results targeting the precise job skills. Then design a learning solution addressing these precise skills and aligning to relevant KPIs.
Finally, measure the change in the KPI to show improvement. Improving targeted performance is a quick and obvious way to prove learning effectiveness, but it’s not the only area to focus on. Opportunities abound for learning to support the business need. Leaders want to avoid or at least minimize risk. Learning is an antidote to risk. Knowledge helps leaders and employees become aware of what they must do to minimize or even avoid risk.
Another area preoccupying leaders is constant change. With change comes many unknowns and risk. Again, learning is the panacea for change. Essentially, the more leaders know, the better they are able to manage both change and risk.