What Is the Importance of KPIs for Performance Measurement?
Have you set learning goals this year? Sales goals? Team goals? Business goals? A new year means new goals and typically bigger goals than the year before.
The best way to assess if you’re on track to reach company goals throughout the year is by identifying measurable key performance indicators (KPIs).
KPIs are often confusing and may seem abstract, especially if you’ve never heard of them before. However, understanding the advantages and disadvantages of performance indicators will help you realize why you need to track them in your workplace.
In this blog, we’re looking at KPI importance, as well as KPI strengths and weaknesses.
Are you ready to learn about “What is a KPI for an employee?”
Do you want to know how KPIs can elevate business success?
Let’s jump into the KPI pros and cons you need to know.
What Are KPIs and Why Are KPIs Important?
Key performance indicators are evaluation metrics that give you a pulse on a team or individual’s progress. They help you measure quantifiable objectives and goals.
If goals are the destination, KPIs are the road signs that keep you on track. If a road sign doesn’t tell you something you need to know, it’s irrelevant, right? KPIs let you know if you’re headed in the right direction (ideally, North, towards that sales goal).
A good KPI is SMART: Specific, Measurable, Achievable, Realistic, and Timely.
For example, if your goal is to increase customer satisfaction, you might have your customer service team go through refresher training. To determine if the training is working, a specific KPI you may consider measuring is customer satisfaction rates. Tracking that KPI month-over-month for the next three months helps you understand how effective refresher training is for your customer service reps and if it positively impacts customer satisfaction.
Now that you know more about the importance of KPIs and their usefulness, let’s look at KPI advantages and disadvantages when measuring performance.
The Advantages of KPIs
1. Close Learning Gaps
KPIs help you recognize and address learning gaps. If you’re not reaching an objective or goal, it may indicate that your employees need further training.
Let’s say you want to convert 20% more sales leads. You communicate the sales goal to your sales team, intending to achieve it by next quarter. However, after three months, you see no closing increases. Sales training helps your team understand the fundamentals of prospecting, selling, and closing, so every call becomes a realistic opportunity.
Awareness of a skill gap allows you to begin training your employees accordingly. Setting a measurable KPI with a tangible outcome helps you evaluate employee performance and improvements post-training.
2. Empower Employees to Take Action
Empowering your employees to take action is another pro of KPIs.
Your overall goal might be making more sales this year compared to last. How will you attain that, and how will your team know what to do? Clear KPIs drive your employees to action and direct them along the way.
A tangible KPI spoken by a sales director might be: “Send 30 sales emails every day” or “Follow-up with leads within 1-hour of the first contact.” The number of sales emails sent and the follow-up time frame are both specific, trackable KPIs.
If you start to see results, then you’re on the right track. If you don’t see results, then revisit the goal(s), the KPIs you’re measuring on the way to that goal, and make pivots as necessary.
3. Measure Outcomes and Results
KPIs allow you to measure outcomes and results. A good KPI, by definition, should be measurable and trackable. Without a way to measure progress towards your goals, you can’t make improvements or adjustments.
Perhaps you attained your goal of increasing sale conversions by 20% for the year. Congrats! But how did you meet this goal?
- Did every sales team member complete sales training?
- Was your goal too low?
- Did you have one superstar salesperson who accomplished most of the team’s goal?
On the other hand, if you didn’t reach your goal, why not?
- Was your goal too high?
- Were there employee knowledge gaps?
- Did managers have difficulty streamlining the sales process?
Whether you reach a goal or not, it’s essential to know “why.” One of the major strengths of a KPI is its ability to measure whether certain training decisions paid off or fell flat.
The Disadvantages of Performance Indicators
1. KPIs Need Time
One con of KPIs is that they don’t always offer actionable information immediately.
If you invest in a new employee training program, you want to know that it’s making a difference. But training KPIs don’t show team transformations in a day. It may take a few months before seeing results, depending on your goal(s) and how often you’re tracking employee training KPIs.
As the saying goes, “A watched pot doesn’t boil.”
Don’t hit the panic button on your KPIs too early; give them time to heat up.
2. KPIs Have a High Learning Curve
KPIs are useful but don’t try to overload yourself with too many at once. If you’ve never identified and implemented KPIs before, it’s best to start with one or two.
Have you ever decided to start working out after months of no physical activity? You get excited, get dressed, and go to the gym. You do legs, arms, abs, and cardio–it feels great! But then the next day arrives, everything hurts, and you don’t want to move.
The same experience can happen with KPIs. One limitation of performance measurement that you may fall into is tracking so many KPIs that you become overwhelmed by all of the data. If you try to implement too many at one time, you’ll lose track and end up failing at all of them. This can leave you feeling frustrated and discouraged as a manager.
Start small and work your way up. As your comfort level creating and implementing KPIs increases, you can start adding more.
Overcome the Limitations of Performance Measurement
KPIs are a powerful tool in the toolbox of any business willing to invest in them. KPIs will help you identify learning gaps and break down large business goals into smaller, measurable data points.
Though there are both KPI advantages and disadvantages, the advantages far outweigh the disadvantages. Nothing drives business success like forming strong KPIs that lead your team triumphantly toward business goals.
When it comes to KPI pros and cons, we’re pros.
We can help you understand KPIs, how to implement them, and track them for prolonged success. At Unboxed Training & Technology, we have a team of employee training consultants ready to help you upskill your virtual workforce.
Request a demo of our award-winning Social Learning Management System (LMS) to see how you can track measurable learning and development KPIs today.