Measuring staff performance has always been an area of much controversy and a dreadful experience for most supervisors and managers. Simply put, it is not easy to satisfy everyone. No employees will agree that their scores are not to the mark expected by the management. The situation becomes cloudy and shady if supervisors act in a bias manner and worse still if management does not have a tested system to rely on for objectivity and consistency.

Some organizations employ the Balanced Scorecard Key Performance Indicators (BSC KPI) methodology to measure performance. While this is by far an objective approach, its objectivity, however, is dependent on the integrity of its operators. KPIs by themselves are useless if they measure simple business outcomes or conceived upon simple business interpretations.

The Quality of KPIs is dependent on five factors:

i. Culture – if employees do not appreciate productivity, KPIs will be meaningless. A sense of performance based culture ought to be built into the business implementation system.

ii. Business Conception – The correct interpretation of an organization’s business is crucial for the right KPIs to be picked to measure performance.  If the conception of business is flawed it will lead to poor selection of KPIs.

iii. Leadership – Inspirational leadership creates challenges among the workforce and hence, employees will be ready to take on new challenging roles in the organization. This challenging role can be represented via high impact KPIs to lift the performance challenge. KPIs should bring about the desired behavioral changes. Thinking and strategizing elements need to be included in KPIs to demand extraordinary results. An example would be,  instead of asking an employee how many books he has read in the last three months, we could ask him how many new ideas he has come across in the last three months. The element of thinking is incorporated in the second KPI.

iv. Installing Right Processes – this is related to point number (ii). It is crucial to understand your business in order to be able to measure desired outcome. In this respect, it is equally important to install the right processes to help you to get your performance numbers. We have to admit that our expectations determine our performance. If you don’t demand the best we will settle for the minimum. This applies to KPI setting as well. Our KPI decides the kind of infrastructure required on what we want to achieve.  If our thinking level is low, we will aim at low lying fruits and hence, we build simple processes around to achieve simple outcomes. We need to abandon complacency and embrace challenging outcomes.

v. Competency – to be able to pick right KPIs we need to educate ourselves on the concept of KPI setting and business processes. Industry knowledge is crucial. We need to possess the knowledge and skill set needed to identify good KPIs. Besides, we need to have staff with high-level skills to be able to take on the leadership challenge.

A cursory look at some corporate and departmental KPIs reveals that KPIs of executives and above are not challenging enough. The KPIs are largely crude KPIs, namely, number of articles written, number of meetings attended and shockingly some of these appear at the CEOs corporate scorecards. While we may forgive ourselves as we may be still at the learning level, this is not tenable in organizations wish to become world class. The way forward the challenge is not sustaining the current level but abandoning the present in search of new benchmarks. We need to break away from the conundrum of ‘always in the learning’ towards seriously engaging in high level construction of our business conception and interpretation.

What we need to do, henceforth is:

1. Reinterpret your business outcomes. Look for thinking KPIs rather than work done or lagging KPIs.
2. Reassess your processes. Your current processes may be only meant for simple outcomes.
3. Improve your staff competency and hence give them challenging expectations.
4. Incorporate strategic KPIs at every level. Every executive must have 1-3 strategic KPIs that challenge them in their current capacity.

Below Is an Example of How We Can Move Away From Simple KPIs to More Challenging KPIs.

The 2011 KPIs are challenging as it requires new processes and employees need to expand their knowledge base and skill sets to contribute to the KPIs. In comparison, the 2010 KPIs were largely simple in outcome, requiring simple competencies, were not challenging enough, and not demanding the best out of an employee.

For example, 2011 KPIs No. M1: Strategic Plan Effectiveness Index requires an employee to have extensive knowledge in the area of assessing Strategic Planning effectiveness. The employees are required to have vast knowledge and only through research and comparative studies can this requirement be met.

On the contrary, 2010 KPI M1a: Percentage Increase in Knowledge only requires an employee to do a simple Pre-Post Survey to gauge the knowledge growth or understanding of participants. This does not challenge the employees beyond the need to draw up a list of questionnaire. This KPI is readily achievable.

On a scale of 1-10, an employee would qualify a 10 on the 2010 KPIs. But, he/she may only be able to score a 5 on the 2011 KPIs.

In conclusion, we can safely say that:-

1. Simple outcome KPIs could be the cause of most  employees  achieving performance scores  90% and above .
2. Some employees may have scored less, perhaps, in the region of 60%-70% – this could be because their KPIs are very challenging.
3. HODs may have compromised on simple outcome KPIs to gauge individual and department’s performance. Instead, they should develop challenging KPIs for their employees and build around this KPIs the necessary infrastructure and processes to help them to achieve breakthrough performance.
4. It is a myth that high scores always reflect high performance. It is all depends on how easy or tough the KPIs are.

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Segaren Arumugam is a certified Strategic Management and BSC Practitioner, accredited by the University of George Washington USA (2007). He holds an MSc in Corporate Communication from University Putra Malaysia (1998), an LLB (honors) degree from the University of London (2008) and a Social Sciences degree from the University of Malaya (1987).

He has vast experience in the area of management particularly in BSC, performance management and strategic planning. He has been actively involved in the development of the BSC methodology for the EPF and has worked with Dr. Robert Kaplan’s team in the BSC Collaborative with EPF. He has great conceptual insights into practical issues of implementing BSC as a strategic management framework in transforming organizations and he brings with him an expertise in crafting strategic objectives, identifying KPIs, developing cause and effect relationship, performance gap, issue resolution, reporting mechanism, networking and getting into the strategic mindsets of the CEOs and top management. He can be reached at (gnana@epf.gov.my or through the editor).