- KPI goals should be aligned to the company objectives and delegated to departmental and individual level.
- Each department connects to one another working towards the same company goals.
- The KPI goals for individual employees could be listed clearly once the company and departmental goals are set.
Big companies usually have structured departmentalization with specific job scope for each team and position. The employees could work independently but also may cause poor team cohesion if the job division is too particular.
In fact, if the company needs all employees from all departments to stay connected and work towards the same goals, proper set up of the Key Performance Indicator (KPI) system is required for the business.
We believe that most of the business leaders have heard of the KPI system and are implementing it in their businesses, but mostly used to be focusing on departmental or individual level only.
Organization > Department > Individual
Once the companies determine their performance goals, all departments should set their KPIs in accordance with it and work towards the same directions. This applies on the individual level as well. The KPIs for individuals should be able to assist the department to achieve the goals that have been set earlier.
Ideally, when the employees achieve their KPIs during individual level, the whole department shall also complete the department’s KPIs at the same time, which also helps to achieve the company goals by then.
Being a body corporate it requires a group of persons incorporated to carry out the business operations (or it might be ‘AI’ technology in the future). The KPIs link organizational vision to individual action and that is why we emphasize the importance of delivering the company goals to departmental and individual levels to work towards the same directions.
Hence, what makes a KPI effective?
Over the past years, we have been involved in various industries to help improve and develop useful business processes and KPIs for business growth, and there is one franchise business that approached us to seek assistance to design Key Performance Indicators for their business:-
Business scale: 5 branches
Business model: Branch expansion and improve sales performance
We review and set up their company/business goals then deliver them to departmental and individual level to set up KPIs accordingly.
Target: The market share should increase by 100% this year, which means:
The number of branches need to be doubled up, which means they need to expand 5 more branches.
Branch sales performance should increase by 100%.
With such ‘high standards’, let’s see how should we proceed to set up KPIs on different level:
To expand 5 more branches
Assuming that there are only 2 employees in the department. Each employee should work hard to attract business investors and set up 2.5 branches. Or else, it would be a senior employee to set up 3 branches, and another one is 2 branches.
When the goals are clear, we should proceed further on developing an action plan, which include new branch location surveys, budgeting, etc.
As for other departments, the main goal is to boost sales performance and should be increased by 100% compared to last year. New branches shall have breakeven as base and doubled up as yearly growth.
Develop KPIs and estimate budgets for marketing purposes.
HQ Operation Departments:
Set up individuals’ KPIs for supporting staff such as, to improve branch operation and productivity, product/service quality in order to attract and retain customers.
Once we string together the performance goals of all departments mentioned above, they all lead to the same goals and each performance indicator is not set out of thin air. The employees work towards the same directions according to the action plan to achieve the said KPIs, and the company goals should be also achieved by then.
However, reality is always full of surprises. It is not difficult to set goals but it is challenging for execution as it involves the employees, financial availability, time constraints, product and service quality control, target audiences demand and satisfaction, market trend changes, etc.
Therefore, by looking at the term “market share”, it seems simple but actually is in fact far from easy. To start developing a useful KPI system, we must not forget to review and optimize the work processes (SOP) so that we could make KPIs effective.
- What to do if the employees fail to meet KPI goals?
- Writing an effective SOP helps retain employees?
- How many SOPs do you need in an organization?