Do targets drive the right behaviours?
Key Performance Indicators (KPIs) are an effective way to measure performance of a organisation, team or an individual against the overall business goal and objectives. But do they drive the right behaviours? In our experience, if KPIs are not thought through, they can be more detrimental in driving the wrong behaviours as some may do the wrong thing in order to achieve a KPI, or they can sometimes be contradictory to other departments objectives.
For example, field sales teams and individuals are generally targeted on number of calls made and how many products sold per call or sales revenue. Having both of these as KPIs is fine, as long as the field sales rep is clear on what is more important. Weighting of KPIs can really help employees understand the priorities and what drives business growth. Evidently in this instance, they could make 20 calls a day, but if they aren’t selling anything, that isn’t going to drive the bottom line. But similarly hitting their revenue target for the day in one call, doesn’t mean they can take the rest of the day off, as this doesn’t drive overall distribution, volume or brand awareness. We also often see many sales individuals driven purely by the revenue targets as they see it as their primary objective. As a result, they can be bullish in their approach in order to hit the target, give away other deals in order to hit the magic number. This does not benefit the business, individual or the customer. Measuring the what (the metric) as well as the how (the approach taken) are equally, if not more important than the target itself. A successful sales person, looks to build long-term trust and relationships by doing things the right way, rather than potentially damaging those relationships in order to hit a short term target. Considering the how, not just the what, builds strong ‘trade equity’ between the sales person and customer.
KPIs should also compliment one another across all departments. Sales targets need to avoid being one dimensional based on volume and revenue, but should also support marketing targets such as driving brand awareness through in store marketing, or support supply chain with timely ordering. Ensure that KPIs drive a collaborative approach across teams so they work together to achieve the same goals, otherwise you create silos of working which is unproductive.
KPI setting is not black and white, ensure they fit with the overall business aim, work in harmony across all functions and drive the right behaviours at an individual level by measuring the what and the how. Ensure all your managers take the time to have reviews with their teams throughout the year, not just at year end, to ensure that employees are moving in the right direction and thinking about the grey areas, not just the black and white.
If you would like some direction on how to set the right KPIs, get in touch with us at: firstname.lastname@example.org