If you own a business, or you’re leading a department, you’re probably well aware of how tough it can be to motivate employees.
But believe it or not, one of the best ways to do this is by creating key performance indicators (KPIs) that clearly define what success looks like.
Now, depending on what you think about KPIs, this might sound a bit counterproductive, but trust me on this.
After leading human resources departments at several large companies, and working with countless clients through my consulting and coaching practice, I’ve seen firsthand how effective KPIs can be.
But if you want to create KPIs that will actually inspire employees and motivate them to excel, then you have to do it right. Otherwise, they could end up having the completely opposite effect by resulting in anger, anxiety, fear, and frustration.
A research paper from Gallup, which looked at data from more than 60 million employees, shows just how big of an issue this is, and how important it is to create KPIs that are inspirational.
Because at the end of the day, your employees are going to have to motivate themselves, which means as a leader, your job is to simply inspire them to maintain their own motivation.
That being said, the paper from Gallup points out that only one in five employees strongly agree that their company’s performance management system actually motivates them, offering a strong indication that most companies are not getting this right.
Furthermore, only two out of every 10 employees strongly agree that their performance is being managed in a way that motivates them to do exceptional work.
Based on these statistics, clearly, most companies are struggling to create KPIs that actually motivate their employees.
But if you know what you’re doing, creating KPIs shouldn’t be that difficult, and it could be one of the best ways to truly inspire and motivate your team.
So, if you’re wondering how to motivate your employees, or you’re struggling to create effective KPIs, then you should definitely keep reading.
Because in this article, I’m going to explain what KPIs are, how they can benefit your business, and how you can create KPIs that will actually motivate your employees.
What Are KPIs?
Key performance indicators (KPIs) are metrics that organizations can use to evaluate their success when attempting to achieve specific business objectives.
They can be used for all kinds of different purposes, including things like tracking progress, identifying trends and patterns, and making data-driven decisions.
In the context of employee performance management, KPIs can be used to evaluate and measure the performance of each of your employees, allowing you to assess their effectiveness and productivity, recognize what they did well, and identify any areas for improvement.
These KPIs can be used to measure practically anything, including everything from accuracy, effectiveness, and productivity to customer satisfaction, sales targets, and everything else in between.
Depending on the kind of business you own, the industry you’re operating in, the kinds of goals you’re looking to reach, or how you want to track your progress toward those goals, KPIs can vary significantly.
For example, a sales team may use KPIs such as monthly revenue, conversion rates, and customer acquisition cost, while a marketing team may use KPIs like website traffic, social media engagement, and email open rates.
How Can KPIs Benefit Your Business?
It’s important to note that while KPIs are valuable tools for evaluating the performance of employees, if you want them to be effective, they need to be used in conjunction with other performance management strategies, like regular feedback, coaching, and professional development opportunities.
That being said, setting realistic KPIs for each department and each individual employee, can offer a ton of benefits for your business. This includes things like:
- Goal Alignment: KPIs can help to align your employee’s goals with the overall goals of your business, ensuring that everyone is working toward the same objectives.
- Greater Loyalty: When employees see that they’re contributing to the success of your business and understand how they’re helping you get to your goals, they will know they are an integral part of your organization, and this can help to inspire greater loyalty.
- Increased Productivity: By setting reasonable and realistic targets, your employees can focus on achieving their goals, and this can lead to increased productivity.
- Improved Performance: Regular monitoring of KPIs allows managers to identify areas where employees may be falling short, which gives them the chance to take corrective action. This can help to improve overall performance and help your employees to stay on track.
- Employee Motivation: When your employees have clear goals and understand how their performance will be evaluated, they are more motivated to work toward achieving those goals.
- Better Decision-Making: KPIs offer data-driven insights that you can use to make informed decisions about things like resource allocation, staffing, and other critical business decisions.
Now, I know this might sound too good to be true, but I can assure you it’s not just pie in the sky, and there is plenty of evidence to back up the benefits of employee KPIs.
The research paper from Gallup that I referenced above, for example, found that employees who strongly agree that their goals are aligned with those of their employer are 3.5 times more likely to be engaged in their work, and employees who strongly agree that they’re held accountable for their performance are 2.5 times more likely to be engaged, and this can substantially increase your company’s profitability.
Interestingly enough, Gallup also found that only 21 percent of employees strongly agree that their pay and benefits motivate them to achieve their goals.
That being said, it’s obvious that employees need more than just a paycheck and some benefits to stay motivated to reach the goals they’ve been given, and KPIs can help to fill that gap.
How to Create KPIs That Will Motivate Employees
Now that you have a better idea of what KPIs are, and how they can benefit your business, let’s talk about how you can go about creating KPIs that will actually motivate your employees.
But before you can even begin to assign specific KPIs to each department or individual employee, you have to come up with a plan that outlines all your business objectives for the coming year, so you can actually define what you’re working toward.
Then, once that’s done, you can determine how you’re going to delegate responsibilities, start setting specific goals for every department, and work with your managers to come up with relevant KPIs for the employees who work under them.
Ideally, this needs to be a collaborative process so you can come up with the best ideas and get greater employee buy-in.
As I said above, I know this might sound counterproductive, as it’s well-known that employees tend to resent their employers for subjecting them to this sort of thing.
But if it’s done right, you can create KPIs that actually motivate employees, inspiring better performance, greater loyalty, and improved employee engagement, among other things.
With that in mind, below, I’ve explained several dos and don’ts that you need to keep in mind if you want to create practical KPIs and improve your company’s bottom line.
Offer Incentives
If you want your employees to be as excited as you are about reaching your business objectives, then it helps to offer them incentives for reaching the goals described in their KPIs.
The KPIs themselves might not be particularly motivational, but if employees know that they’re tied to specific incentives, then this can help them get inspired to take things to the next level.
There are many different ways to go about doing this, including things like bonuses, raises, promotions, paid vacation, extra time off, or more elaborate things like trips, or gifts, if you can afford them.
Bottom line – the more incentives you offer, the more it’s going to motivate your employees, so make sure to offer whatever you can to incentivize their performance goals.
Be Reasonable
One of the main reasons why employees tend to have such negative associations with KPIs is that employers often give them targets that are impossible to reach.
According to Gallup, only 2 in 10 employees strongly agree that their performance metrics are within their span of control, which means it’s likely that 80 percent of employers are creating unrealistic KPIs.
Some business owners believe that this can help to light a fire under their employees, and motivate them to do better, but nothing could be further from the truth.
That being said, if you create KPIs that are totally unreasonable, your employees are going to resent you for it, and it’s certainly not going to inspire them.
So, whatever you do, make sure you set employees up to succeed by creating KPIs that they can actually meet. But that doesn’t mean setting the bar too low. You want these goals to be challenging, but not impossible.
Provide Clarity
When it comes to KPIs, it’s all too common for employees to be unsure of what’s expected of them.
For example, as Gallup pointed out, only 50 percent of employees have clarity on the goals they’re supposed to reach at work.
And if your employees aren’t sure what’s expected of them, then the chance of them actually hitting the KPIs is pretty much slim to none.
So, when you’re creating KPIs, you’ve got to provide absolute clarity on what exactly is expected and why it’s important, and not just from your perspective.
With that in mind, when communicating these KPIs to employees, make sure to ask them if they fully understand what’s expected, and take the time to answer any questions they might have.
Don’t Threaten
Unfortunately, employers also like to present KPIs to employees in a negative or threatening way, as if they’ll be fired on the spot if these metrics aren’t met.
And while employees do need to be held accountable, these things need to be explained to them in a positive and respectful manner.
Because if you’re using KPIs to threaten your employees’ jobs, then they’re not going to be happy about it, and they’re unlikely to be inspired to help you reach any of your goals.
Oftentimes, employees who are treated this way will actively work against the interests of their employers, attempting to get revenge on them while they interview for other jobs.
At the very least, this sort of behavior is not going to inspire greater loyalty or productivity from employees, so make sure to avoid doing this at all costs.
Collaborate
One of the best things you can do to create KPIs that will actually inspire your employees is to involve them in the process.
As Gallup noted, only 30 percent of employees strongly agree that their manager involves them in goal setting, so this definitely isn’t a common thing. But employees who are involved in goal setting are almost four times as likely to be engaged when compared to other employees.
And if your employees are more engaged, then they’re going to be much more motivated to reach whatever goals you’ve set for them, and that’s always a good thing.
So, whenever possible, make sure to allow your employees to contribute to the creation of their KPIs.
And if an employee is struggling, sit down with them, and have a frank discussion about it, so they can let you know if they feel that any of your expectations are unreasonable, or if there’s anything you can do to help them reach those goals.
Are you still wondering how to create KPIs that will actually inspire your employees? Contact us today to find out more about how we can help you to do just that.
Business Leadership, Personal Development, Team Management