KPI Is Not Just an Acronym

Blog located in HR Solutions, Small Business posted on July 11, 2014

Finding the right talent is extremely challenging.  Most organizations have caught up on continuous innovation and change, rather than coming up with new products or services.  Today, competitive advantage is also driven by who you hire. It’s driven by your ability to attract and retain the right talent and organize that talent in ways that lead to continuous innovation and change.

Talent With Respect To Business Strategy

Talent considerations should start upstream with respect to the business strategy.  Once a business strategy is established, talent must be front and centre in terms of implementation.

Careful attention should be paid to making sure employees understand the strategy and support it.

In addition, the right mix of skills has to be developed so that the business has the competencies and capabilities it needs to execute its strategy.

KPI for HR

A KPI or a Key Performance Indicator is a tool used to measure the performance of the organization or department. These KPIs must reflect the goal of the department as a reflection of the overall long-term organizational goals and strategy.

Many business leaders don’t see the value of KPIs for people. Those using them are seeing results.

As a rule of thumb, Morton Kempt summarized how KPIs can be an effective practice in HR:

  • Aligned with the strategy and business plan of the organization. The targets of the HR KPI should be linked directly to the strategy of the organization.
  • Personally owned. The HR KPI should be owned in two ways; firstly it should be linked to one person who is accountable for its success. This means that it is not falling between roles and people can argue about fault etc. Secondly the HR KPI should be meaningful for that person.
  • Actionable. Every HR KPI should have a project or a set of actions which will lead to meeting the target. It should be within the circle of influence.
  • Well defined. Every KPI should be precisely defined. An exact definition, which data are involved, where the data is collected from and delivered by whom. It should be formulated in a way so an outsider will be able to look at it and find the result.
  • Relevant. It must be relevant in the specific context of this HR department in this particular company.
  • Timely. There must be a specific time when the target should be met.
  • End KPIs (compared to Mean KPIs). Consider a KPI which is about the number of people who had an annual review. This is a classic ‘mean’ goal. It is not an end in itself to hold annual reviews. It is the desired results of the annual review which are interesting. All HR KPI targets should be end-goals not mean-goals.
  • Predictive (i.e. leading indicators).
  • Few.  It is better to meet the target of three or four KPIs than to meet six of ten. When you have too many KPIs you tend to select the ones you feel are the ones to meet and consciously or unconsciously not even try to meet the others. This subjective section of KPIs are bad for an organization. Better select a few and meet them all.
  • Linked to bonus. It should make a difference to the person if he/she meets the HR KPI target or not.

KPIs do work in as much as people tend to follow them. If they are badly formulated employees, in turn, will also behave badly. ‘KPI’ is not just an acronym. Properly formulated and used, KPIs will contribute to your competitive advantage.

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