Introduction to Performance Metrics
Performance indicators are essential tools that help organizations align their daily activities with strategic objectives to meet their goals. (Parmenter, 2010). These metrics can range from tangible figures such as sales volume, call volume, and close ratios to more qualitative measures, particularly in roles without direct numerical output. Identifying performance in such positions can be challenging, with attendance often serving as a primary indicator in traditional settings. In remote work environments, however, monitoring attendance and ensuring productivity presents unique challenges, as managers cannot directly observe their employees. This lack of visibility can lead to discomfort among managers, some of whom may doubt their employees’ ability to maintain discipline and meet deadlines without direct supervision (Delanoeije & Verbruggen, 2020; Kaplan et al., 2018).
Distinguishing Productivity from Performance
Productivity is defined as the ratio of output generated per unit of input (Drumea, 2020). While determining inputs and outputs can be complex, it is crucial for managers to set clear expectations and goals for remote workers. It is essential to understand that productivity does not equate to performance directly, although some managers might conflate the two (Drumea, 2020).
Key Performance Indicators (KPIs): The Backbone of Strategic Planning
The Austrian government’s 1996 publication introduced the concept of measuring performance using Key Performance Indicators (KPIs). KPIs are critical measures that an organization considers vital for its success in the short and long term (Parmenter, 2010).
There are seven characteristics of KPIs. These include:
- Nonfinancial measures
- Frequently measured
- Acted on by the CEO and senior management
- Indicate what action is required for staff
- Measures that are the responsibility of a team
- Have a significant impact
- Encourage appropriate action
True KPIs are monitored with high frequency—hourly, daily, or weekly. If monitored less frequently, they do not qualify as KPIs. Moreover, KPIs should not be directly associated with financial metrics to distinguish them from key result indicators. These indicators should vary across different workgroups within the organization, aligning with specific goals and significantly influencing the organization’s objectives (Parmenter, 2010).
Challenges in KPI Design and Implementation
The process of designing and implementing KPIs requires careful consideration. Common pitfalls include defining too many or too few KPIs and failing to align them with the company’s overall strategy (Purevsuren et al., 2020). An imbalance in the number of KPIs can lead to either a lack of focus on essential outcomes or an overwhelming focus on non-critical measures. Furthermore, if the KPIs of individual business units do not align with the organization’s strategic goals, it can result in the company failing to achieve its objectives due to a lack of focus on the key activities required for success.
References
Delanoeije, J., & Verbruggen, M. (2020). Between-person and within-person effects of telework: A quasi-field experiment. European Journal of Work & Organizational Psychology, 29(6), 795–808. https://doi.org/10.1080/1359432X.2020.1774557
Drumea. C. (2020). Work-related stress and subsequent productivity in a teleworking environment induced by pandemic-related confinement. Evidence from the public organizations. Ovidius University Annals: Economic Sciences Series, XX(1), 337–341
Kaplan, S. Engelsted, L., Lei, X., & Lockwood, K. (2017). Unpackaging manager mistrust in allowing telework: Comparing and integrating theoretical perspectives. Journal of Business & Psychology, 33, 365-382. https://doi.org/10.1007/s10869-017-9498-5.
Parmenter, D. (2010). Key performance indicators (kpi) : Developing, implementing, and using winning kpis. ProQuest Ebook Central
Purevsuren, N., Dashdorj, Z., Khujuu, T., & Norinpel, E. (2020). Selection and optimization model of key performance indicators. 2020 22nd International Conference on Advanced Communication Technology (ICACT), Advanced Communication Technology (ICACT), 2020 22nd International Conference On, 190–196. https://doi.org/10.23919/ICACT48636.2020.9061560
