• RBS Staff

Why KPI Isn’t As Valuable As It Seems

Key Performance Indicators, otherwise known as KPI, are a valuable tool in helping companies assess their performance. Not using KPIs is akin to consciously walking in the dark. Sure, it’s possible to navigate your way through it. But, why take the risk? Likewise, it is possible for companies to have success without establishing and tracking proper KPIs. However, it’s also difficult to define any kind of success by not measuring how you get there. Or, perhaps more importantly, by not outlining what kind of success it is that you are trying to achieve.

This is where KPIs come in. These indicators help companies set timely and efficient goals. They can then use these goals to develop optimal strategies to achieve ideal results. Meanwhile, by keeping track of important metrics, companies will have access to business performance data that will serve useful for performance evaluations down the line.

Why Should Companies Use KPIs?

KPIs are objective and strategic. Although each company has its own different set of metrics, taking the time to identify what those relevant data are will force you to think short-term and long-term. Some of its many advantages include:

Measurable and Quantifiable Results

The main purpose of identifying KPIs is to make tracking progress easier. Using KPIs, it is possible to accurately track the performance and results of any venture. This is because it converts it into hard and concrete data. This way, a company can keep track of how they are performing on a daily, weekly, or quarterly basis. This also helps them gain a better understanding of which aspects need more attention at any given time.

Alignment

The bigger your company gets, the more difficult it is to keep track of everyone’s progress. Using KPIs can help everyone stay focused on a singular goal because everyone involved in a particular project will have access to real-time data. As an added bonus, measuring everyone’s data can help provide added motivation to everybody that’s part of the project so that they can avoid being the weak link. This, in turn, guarantees that everyone is on the same page.

Long-Term Tracking

KPIs allow upper-level management to modify and redesign strategies and plans depending on current and previous performance. In the long run, organizations can use KPIs to gain better insight into employee productivity and performance. This allows them to set more realistic and achievable goals down the line.

Objective Compensation System

Using KPIs, employees can track their own performance and make the necessary improvements on their own. At the same time, companies can use KPIs to have a more objective view on which personnel deserves to receive a pay raise for their next contract, or which employees have worked harder compared to others to warrant performance bonuses.

Where Does KPI Fall Short?

The problem with objectivity is it lacks a human component. Using KPIs may help answer any and all questions generated by outlining your business’ goals and objectives, but it doesn’t paint a complete picture. Thus, there are numerous risks involved in exclusively using KPIs to measure company performance. For example, by focusing solely on results and the bottom line, there is a tendency for employees to focus less on the quality of their output and more on quantity. At the same time, relying on KPIs for achieving long-term goals can prove disadvantageous as these key metrics are more useful for achieving short-term goals. Results-oriented goals can also stiffen employee productivity and creativity as the approach rewards following traditional work methods and standardization as opposed to coming up with new and innovative ways to complete tasks. Lastly, KPIs fail to take into consideration the loyalty between employees and the company, as well as the company and its clients.

Maximizing the Benefits of KPIs

It’s easy to get lost in all the data that you have on hand and believe that you don’t need anything else. However, spending too much time dissecting the numbers can make you forget one simple fact -- any company is lost without its customers and employees. To say that the human element is crucial is only fitting. Sure enough, data is king. However, it won’t guarantee long-term success. It’s simply not enough on its own. Talk to your customers and employees. Ask them about their own personal experience. Reach out to them. Converse with them. If nothing else, these seemingly insignificant interactions can help you gain an even better understanding of the information that you’re collecting. By taking the time to interact with as many as you can, your company can focus on all of the right things while minimizing risks to get the best possible results.

Final Thoughts

Data collection cannot stand on its own or in isolation. KPIs work best when it’s collected and used properly. Preferably, by measuring relevant metrics that make the most impact on a company, as well as by adding a human element. The best results are achieved when you collect data that has a direct impact on things that your company can act on and want to act on.


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