Podcast Episode #14 – When People and KPIs Collide

May 3, 2011 by Stacey Barr

IN THIS EPISODE:

Feature: Don’t Use KPIs in Employee Performance Appraisal.
Q&A: Isn’t organisational performance the combined performance of people?
Quick Tip: Three questions to guide a meaningful performance appraisal.

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  1. Morris says:

    Very interesting point. Individual Performance is a factor to Organizational Performance. Thus the sum of Individual cannot necessarily be equal to organizational performance. There are other factors outside the organization control. The macro environment. Think of the world recession that we experienced in 2007. Even with good individual performance organizational performance would still not be possible. This calls for a holistic approach towards performance management!

  2. Hi Stacy,

    Thank you for your podcast on KPIs and performance appraisal. It helped me more clearly define the following thought:

    Employee performance measurement should not be understood as only being about measuring the performance of employees. Rather, it would be better positioned as being about measuring the outcomes expected from a given employee with the full understanding that the employee can only partially control these outcomes since factors outside of his or her control can also affect these outcomes.

    It would, in my view, still be good to define and measure employee and team goals and results so that the employee knows what they are trying to achieve and the employee and organization knows how they are doing (as well as providing a basis for the development of other HRM or employee performance support systems such as incentives, coaching, and career development).

    We need, however, to be careful when interpreting this information not to assume that these results – be they desirable or undesirable — are due solely to the efforts of the incumbent employee since they may also be at least partially due to other factors largely or wholly outside of the employee’s control.

    Employees and managers should, from this point of view, be seen as being the CEOs of their org chart nodes. In a fully formed performance measurement system (like the one we are attempting to offer at WorkScorecard.com), each has his or her own scorecard (which can also be seen as a more fully developed P&L Statement-equivalent). Their job is to maximize the results reported on this scorecard – i.e., get the highest score they can (assuming, just as with a P&L statement, common sense and ethical conduct).

    In evaluating the recorded outcomes, however, users need to understand that in some cases these results may be driven – for good or bad – by forces which have little to do with the actions or efforts of the employee or manager incumbents of these org chart nodes and take these factors into account when using this information to evaluate employee or manager performance.

    It would sort of be like a regression analysis. There are a lot of independent variables which determine the status of the dependent variable (= the overall performance rating). One of these independent variables is employee performance but there are others which may or may not outweigh employee performance in any given situation. (I hope I am recalling my regression terminology correctly.)

    General managers interpreting managerial accounting results will have to deal with analogous complexities: Were Manager X’s results so good/bad because of anything he or she did or because of market or other factors outside of his or her control?

    Stock market analysts deal with analogous issues when they look at company financial accounting results: Were the results of Company Y good/bad due to the skill of the management team or market, competitive, technological, economic, or other factors? You still measure the performance of the entity (the department or company in the two cases above, respectively); you just have to use some human judgment to interpret the results.

    I would also like to add that I think it is unrealistic to think that we can dissociate judgment from performance measurement. The first thing people do when encountering virtually anything is determine: “Is this good or bad?” This is an intuitive judgmental response.

    Rather than fight human nature, then, let’s align ourselves with human nature by developing rating scales for every performance measure so that people will more clearly know how to interpret the results as well as have a better sense of what level of performance they should be striving to achieve.

    Instead, for example, of just reporting that the average speed of answer in a call center is 20 seconds and leaving it at that, let’s report that the average speed of answer is 20 seconds and that this level of performance equates to a 3.0 = Meets Expectations Rating on a predefined 1.0 to 5.0 scale.

    Please don’t hesitate to call if you would like to discuss.

    Thanks again,

    Elliot Sturman
    elliot@workscorecard.com

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