Key Performance Indicators, or KPIs, are intended to measure performance, but they’ve been misused terribly over the last decade. Employees are being given KPIs that measure factors outside of their control, and many have to spend half their workweek meeting arbitrary numbers that don’t reflect real progress.
In fact, some employees say there’s no correlation between hitting their KPIs and getting their work done.
The problem is, management uses KPIs to determine whether or not an employee is doing their job. The belief is that if someone doesn’t hit their KPIs, they aren’t being productive. That’s largely not true, and the reason is simple: most KPIs are arbitrary and shouldn’t be assigned to individual workers. We’ll dive into this again in a minute, but first, it’s important to know that KPIs aren’t the enemy.
KPIs aren’t all bad
Although they’re largely misused, KPIs aren’t all bad. When intentionally calculated and assigned to teams, key performance indicators can be extremely useful. For instance, when fleet maintenance teams miss their KPIs, management can look into it to see if there might be something preventing the team from working efficiently. It might not be the employees, and could be a tool, like the wrong software, that is holding them back.
So, what’s the problem with KPIs?
If nearly every company uses key performance indicators, why are they so controversial? At first glance, you might think it’s just employees not wanting to be held responsible, but the issue goes much deeper.
The main issue stems from the fact that KPI numbers are provided to employees by people they never meet. There are people who sit around and arbitrarily determine goals without ever talking to the people who are expected to meet those numbers. This is the main disconnect, and makes it obvious why so many KPIs are arbitrary and unreachable.
For example, someone might determine that a member of the marketing team needs to hit 200 likes, 30 shares, and 20 new followers each month on Facebook. Aside from the fact that those are arbitrary numbers, more often than not, the person assigned to this type of KPI won’t be able to implement the strategies needed to generate those numbers.
For instance, if they can’t come up with their own posts or use the company’s Facebook account as they see fit, they won’t have any control over the numbers they’re being held responsible for. If they can create content, but the company has no budget for creating engaging content, they’ll be equally stuck.
KPIs encourage manipulation
When employees can’t reasonably meet their numbers, but their job depends on it, they’ll find ways to get around the restrictions even if it requires manipulating data. When these arbitrary numbers are tied to contract terms or performance evaluations, employees have no choice. They might pay a company to generate more (fake) followers on social media or sign up for the company’s email list.
KPIs don’t always reflect results
Marketing team members who are given KPIs often say the numbers they’re responsible for don’t reflect their results. For example, someone might spend six months engaging with people on social media, which encourages those people to buy the company’s product. Since the marketer’s KPI is only related to email leads, it’s the sales department who will get credit for all the conversions the marketer nurtured.
Handing out KPIs to individuals is the equivalent of giving a gold medal to the last runner on a relay team for crossing the finishing line. You can’t compartmentalize different tasks performed by a team that all work toward creating one final result or you’ll end up crediting only the person who crosses the finish line.
Benchmarks are more effective than KPIs
Benchmarking your company against your competitors is more meaningful than measuring key performance indicators. It involves meeting a large set of criteria rather than arbitrary numbers. For example, it can include social activity numbers, like shares, but it can also involve sales and brand image achievements. It will keep your focus on new developments, emerging trends, and you’ll actually make progress because you’ll be forced to recognize what strategies work and where the gaps are in your own marketing strategy.
Research has shown that assigning KPIs to employees actually causes them to underachieve. Since we know these numbers are arbitrary, it makes sense. They’re spending half their time tracking meaningless numbers and not getting their real work done.
Instead of working with KPIs, try benchmarking instead. That’s how you’ll discover the practices and strategies your competitors are using to get results. Once you know what works, you can implement them in your business to achieve similar results. Benchmarking is simply more effective than using KPIs.