Rethinking Our Approach to KPIs

Rethinking Our Approach to KPIs

Do these abbreviations look familiar to you: CAC, CLV, LCR, NPS, SCR, APV, CTR. They all represent various metrics that are carefully defined by high level management, strategists and business executives in order to track and assess the performance of their business and the success of their organisations.

But what do these metrics really indicate? Do they truly define how well your organisation is running? Well, to a certain extent they do, and it is nothing less than critical for an organisation that thinks of themselves as efficient, to constantly put assessment measures in place (commonly known as KPIs) and align them with their strategy. However, in this article we would like to rethink the traditional approach to KPIs and try to consider the system from a more holistic perspective. Are the following questions something you ask yourself and your team on a daily basis?: “Are our employees happy?”; “Is our organization running according to its core values?”; “Are we, as a company, creating a positive long-term impact?” If not, then find out why we think they’re important to you and your company.

To illustrate our point of view, let us correlate business goals with personal goals. For example, many of us can relate to never quite being satisfied with our own body image or having a constant struggle with our weight. Usually we start introducing changes to our lifestyle and exercise routine just before summer starts, to achieve the desirable result (personal goals). To accomplish your ideal summer beach look, you estimate that you will need to lose 6 kg by exercising at least three times a week, a lot more than you are currently doing. In addition you have to drastically reduce consumption of carbs, sugar, and alcohol. Together all of these become your KPIs.

Rethinking Our Approach to KPIs

To formulate your strategy you have worked in reverse, from identifying your ultimate goal to creating a step-by-step plan on how to achieve it. But let’s be honest, your enthusiasm is running low and reality is setting in, you are starting to struggle after just 7 days into your new venture. You seem to have no energy to exercise, your diet is taking a knock and you’re simply starting to lose momentum and not the weight. Now consider that each time you stumbled you anxiously said to yourself: “What if I can’t go to the beach this summer? I’m so overweight and I have no self control!” That wouldn’t necessarily inspire you to carry on working towards your goal, on the contrary, you’d be dissuaded and suddenly your original beach body aspiration quickly turns into a ‘fear based goal’. At this moment you must be careful not to scrutinise yourself, as it will promote anxiety. Instead, to get your motivation back, you should rather concentrate on seeking positive encouragement, reassurance and a sense of belief. In most cases the best people to give you those things are the people around you: your family, peers, colleagues and people that care about you.

Going back to the world of business, whether you’re an intern or an executive, one always has a responsibility to report on the state of business affairs, and in most cases people find themselves fueled by fear-based motivation such as: “What if I don’t reach my targets this quarter?”; “Will they dismiss me based on my bad performance?”. This methodology, is sadly very common and very unhealthy for the individual and the organisation.

A perfect example of this fear-based behaviour is when Wells Fargo‘s employees realized that they were short of meeting their sales goals, and in order to rectify this, they opened up fake accounts in their customers’ names. According to the Consumer Financial Protection Bureau, the employees of Wells Fargo opened more than 2 million unauthorised accounts, resulting in almost $2.5 million in fees for their customers. Like all people, bank employees respond to incentives, and if the culture rewards reaching your sales targets, and punishes those who fall short, it’s not surprising that employees might go astray (or default).

Rethinking Our Approach to KPIsSo, is there a better methodology? How should we approach our KPIs and take score of our business? Without sounding too touchy-feely, let’s explore the concept of ‘cheer-based goals’. Not in the form of hugs and kisses but in the form of self-belief, encouragement and a genuine positive synergy between those who set the targets and those who achieve them. After all, happy teams equal superior performance, which in turn results in a prosperous organisation that positively impacts the world in general.

A recent study by economists at the University of Warwick found that happiness led to a 12% spike in productivity, while unhappy workers proved to be 10% less productive. As the research team put it: “We find that human happiness has large and positive causal effects on productivity.” Additional research has shown that when workers are happy they’re more effective when collaborating and working toward common goals, and KPIs are an integral part of those goals.

So what are the key factors that contribute to not just employee satisfaction, but genuine employee happiness? Turns out it goes back to your company values. If your value system contains meaningful beliefs and bigger picture pursuits, constantly reminding your employees of them could lead to an increase in productivity, simply by instilling them with a sense of purpose. Purpose may be the single, most overlooked factor that contributes to an organisation’s success. Here’s why: If an organisation exhibits a high degree of purpose in its mission and objectives while taking a stand to benefit society, there is a very good likelihood that employees will more readily demonstrate purpose in their roles at work and become engaged, while adding to their own personal sense of purpose in life as well.

Rethinking Our Approach to KPIs

Salesforce’s motto is “The Business Of Business Is Improving The State Of The World”, not “to increase our bottom line” or “to gain majority market share”, so it’s no surprise that they consequently have succeeded in accomplishing both. Their core values demonstrate the true driving factor behind their success. Arguably, the world’s leading behavioral economist Dan Ariely, who has conducted numerous studies on the subject states: “People want to feel like they’re contributing. They want a sense of purpose, a sense that work itself has an impact.”

When global giant Unilever, decided to put purpose on par with the need for good profits through its ambitious Sustainable Living Plan, its employee engagement rose from the low 50s to the high 80s. However, even more astonishing, the company also witnessed its market capitalization rise from €63 billion to over €100 billion while its earnings per share grew from 1.16 to almost 2.00. If this doesn’t convince you that purpose truly is the underlying secret to a successful organisation, I don’t know what will.

I think we ought to ask ourselves: Are we as leaders, managers and visionaries, inspiring and cheering on our teams to succeed and excel, or are we creating environments of fear, where targets and goals are despised by the very people who help to achieve them?

If you are unsure if you’re working in or operating a fear based environment, check out these 10 indicators: 10 signs you are working in a fear-based workplace

Leave a Reply

Your email address will not be published. Required fields are marked *