Key Performance Indicator or Keeping People Intimidated !
Performance appraisal has become a nightmare these days, and it all starts with setting the KPIs. From my perspective many people miss the whole game in the start itself, i.e to identify what is the KPI they actually need. Many of the KPIs I have seen is just for the sake of giving a KPI and it doesn’t reflect where the company wants to go. For me the objective of any business is to make money NOW and in the FUTURE until unless you are running a charity organization. Does the KPI you set relate to this objective?. In most cases – NO. Even though it may start with this motive from the top, once it gets drill down to the bottom, it actually deviates from the real purpose and it becomes a namesake. I have come across a scenario where two people from the same department had conflicting KPIs and they were fighting each other across the table to meet their KPIs!
So what happens here? Many organizations make a mistake saying that minimum this much KPIs (in numbers) should be there. This actually force the people to invent KPIs which maybe irrelevant to business and this dilutes the whole purpose. And once these invented KPIs comes into picture then the poor employee has no choice other than start running to meet these. And every employee or manager is busy meeting their KPI (invented!!!) and forget the purpose of business. I have heard a saying that local optimization leads to global sub optimization and I always felt that this is very true when you look from a KPI point of view. Every one in every department is busy optimizing their area (or meeting the KPI) but this actually leads to sub optimization of the whole company. I have come across a scenario in an organization where I saw the buyers in purchasing department where chasing all the open orders and forcing the suppliers to bring the item asap irrespective of their lead time. I was curious to understand the motive behind this and came to know that the buyers had a KPI to close all open orders! (local optimization). But what actually happens on the other side is, the cash flow of the company is seriously affected (global sub optimization). And many of these may end up in your inventory without usage and that can be another KPI…..
Is the employee actually responsible for this? I would say NO, because as I mentioned earlier in many cases, they don’t have a choice but to just run around to meet the invented KPIs. So I think the organization should be more vigilant on providing the KPIs. It should be well studied before given to the employees and especially when you tag the performance to your pay. I have also seen the organizations which actually cant align the KPIs in the root stage are going for complex performance management method like Balance Score Card. This is actually suicidal.
The key here is as always go to the basics, understand what you actually want and set the KPIs which allows you to be successful and which helps your business to grow. And if you cant achieve this then better stay away from it rather than punishing your employees and wasting their precious time.