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Measuring Employee Performance
Consistency And KPD

by William Laurent, William Laurent, Inc.Thursday, November 11, 2010

Many electronic performance dashboards and analytic software packages include a core set of pre-canned key performance indicators (KPIs) that let customers jump start their management reporting objectives.  These KPIs are usually quite effective at portraying the most basic measures of employee efficacy and predicting future performance trends.  They have to be.  With so many business organizations aligning bonuses and salary directly to KPIs, there is much at stake, especially for corporate human resource departments.  Relying on the wrong KPIs can stunt employee growth and derail productivity.

But even if core KPIs are effective at distilling the essence of an employee’s operational output into a hard-and-fast number (which reflects real-world value), the expectations of management about what constitutes acceptable performance - at all levels, both inside and outside HR - can be miles apart from one another.  To further cloud the picture, expectations are keyed off of KPI definitions, which often defy clarity.  So as the science around key performance indicators evolves, architects of performance dashboard systems are still experiencing upheaval and disarray in how to best implement the concepts of consistency and performance drivers.

Consistency

The greatness of baseball players is measured by a diverse set of KPIs, known to most fans as “statistics” or “stats.”  For batters, there are a few core stats such as batting average, runs batted in, runs scored, on base percentage, slugging percentage, etc. that are generally accepted as the most effective and time-tested measures of on-the-field performance over the course of a ball-playing career.  Over the span of many years (for sake of argument, a 10-season minimum) these core KPIs are very effective at demonstrating the value of each batter in relation to his peers.  At the end of their careers the highest caliber players will sport considerably better statistics compared to other players.  Having a .333 batting average (one base hit for every three at bats) over a 15 or 20-year career pretty much means that a player will be a shoe-in for the Baseball Hall of Fame.  While there may be a handful of players who reach a .333 average on any given year, few will wind up with a career batting average hovering around this mark.  The moral of the story: The real superstars are the ones who are consistent over long periods of time, not just a few seasons.    

The modern business world is much different from the sporting world.  Generally, a position player will not become a pitcher, and thus require a whole new set of pitching-focused (not batting-centric) KPIs to best measure his worth; however, the goals and objectives of a business person are subject to perpetual change, mutating from month to month.  Here, the overwhelming emphasis is on the short term, e.g., employee productivity on a quarterly or yearly basis.  There is often a real lack of effort in measuring employee productivity over longer time frames.  On the surface, this makes sense.  Because of the relentless nature of change in the business world - reorganizations, promotions/demotions, cross training, etc. - it is usually quite difficult to apply the same KPI year after year and still accurately measure long-term productivity and performance.  Therefore, to properly measure the consistency of an individual employee over time, his or her indicators and criteria of performance must continually be tweaked in order to better capture and reflect their true contributions to the firm.

Great care must be taken when measuring consistency.  When attempting to measure a worker’s value over a long time period, it will be critical that new indicators of performance are actualized (and old ones “retired”) from the moment a new job or varied operational path is undertaken by the employee.  This will hold true even for changes in a role that may look trivial.  For example: A COBOL programmer who has been retrained and is now a JAVA programmer may still be a “programmer” in title, however, if his/her productivity is being automatically measured via lines of code written or number of bugs fixed, the end expectations of what constitutes quality performance must change.  Otherwise, there will be disappointment and problems for both manager and employee.

At a higher level, consider the sales cycle.  The process of bringing a product to market may take years,  and once the product is released to the public the sales process can be even longer.  During that time many of the key personnel associated with the product may have changed sales missions within the organization, making individual consistency much more difficult to measure.  (Consequently though, accurate measurement of the product’s effectiveness should be much easier to accomplish.)

Performance Drivers

Key performance drivers (KPDs) focus on the criteria that will impact or “drive” KPIs.  Taking the baseball analogies a little further, a Major League ballplayer may have a year where he compiles more than 100 runs batted in.  Impressive enough, but this statistic will depend heavily on the performance of the other players on his team.  In other words, teammates need to get on base so that he can drive them in.  Thus the KPI of other players (their ability to get on base) will directly impact the KPIs (in this case RBIs) of our ball player.  The KPIs of the other batters on the team become KPDs, and the ability of players to reach base impacts/drives the number of RBIs of subsequent batters.

This KPD dynamic is important to understand when assembling KPIs for employees.  No KPIs live in a vacuum; there is always causality, always a complex web of interlocking occurrences that must be understood and documented to truly understand whether the portfolio of core KPIs have staying power and are capturing the intended business realities.

Capturing the team dynamic as it relates to overall performance is one of the most difficult tasks for a manager or performance analyst, especially when they are more “hands-off” the core operational processes than they are “hands-on”.  Depending on an employee’s job and level within the corporate structure, their overall performance may be heavily determined by team members.  For many, this can spell bad news come bonus time, when another person’s work or ethics negatively impacts another.  Bonuses are meant to reward employees for achieving superb results and motivate them to do an even better job in the future.  But without understanding the KPDs, which often remain buried behind the scenes, incentive payments will not reflect actual operational performance.  Setting up both team goals and individual goals and measuring them in parallel - with alignment of team and individual expectations - will help alleviate some of this disharmony.  By also striving for a decent level of predictability, all goals and attached KPIs will become more transparent and effective.  The same type of diligence can be applied to situations where employees are highly dependent on the healthy functioning of software or machines to do their jobs, where system bugs or machine downtime will function as key drivers of performance.

About the Author

William Laurent is one of the world's leading experts in information strategy and governance. For 20 years, he has advised numerous businesses and governments on technology strategy, performance management, and best practices—across all market sectors. William currently runs an independent consulting company that bears his name. In addition, he frequently teaches classes, publishes books and magazine articles, and lectures on various technology and business topics worldwide. As Senior Contributing Author for Dashboard Insight, he would enjoy your comments at wlaurent@williamlaurent.com

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