How to set SMART KPIs for your employees
Key performance indicators (KPIs) that are specific, measurable, attainable, relevant and time-bound (SMART), are goal-based indicators that can help keep your employees on track and build your business. Here are some considerations to ensure your staff are on the right path.
Specific
Specific KPIs mean being able to ask questions like “What has to be done?” and “What outcomes will there be?” For example, you could set specific sales figures that need to be met or processing a set number of orders a day.
Specific KPIs are much easier to track than, say, “Must perform their job to an expected standard”, and there will be less room for confusion. As the expectations are more clearly defined, employees are less likely to misinterpret them. It will also make it easier for you and your employee to identify a clear plan to achieve the KPI.
Measurable
It’s best to define what is being measured. Depending on your industry, you may wish to measure sales performance, how many orders an employee processes per day or how many new customers they bring in. Remember to specify how it is being measured, such as the number of units an employee sells or how much they need to increase their sales revenue as a percentage.
Also be mindful that KPIs may change over the course of your business’s life. For example, during tough economic times, it may suffice to focus on customer retention as a goal. However, during flourishing times, you might expect a greater amount of new business.
One way of measuring a KPI could be to take the average sales figures for each month and use that as a barometer for the norm. Every six to 12 months, you could increase KPI targets by how much your business has grown.
Attainable
KPIs should work to motivate your employees to work hard, but not be unrealistic and out of reach. Ensure they are not set too high to be demoralising for employees who can’t attain them, but also not too easy that they cruise along. One way to ensure this is to get the employee’s feedback on what they think their potential is. You could also base it on previous employees in the role and what they have achieved.
Relevant
It’s important to set KPIs that work towards growing your business and align with your goals. This will mean having a clear idea of how you want your business to develop over the short, medium and long term. For example, do you wish to reduce complaints, increase the return on profit or expand your market reach? Ensuring KPIs are working in tandem with your business goals will mean your business stays on track with clear objectives.
Consider that all employees’ KPIs should be relevant for your business’s goals and future – even roles that may not seem like they contribute to the financial growth of your business. All of your employees can contribute to your business’s success, and their KPIs should reflect their potential, as well as their core duties. For example, KPIs for your IT department could be maintaining IT systems as well as developing a website with advanced functions, such as an online ordering system.
Time-bound
The most effective KPIs are measured against a time factor, such as targets to be met per day, per month, per quarter and annually. Each KPI will be different and should reflect all time phases.
Top tips to consider
• Ensure KPIs are regularly monitored through meetings. Don’t set and forget them.
• Reward staff who exceed their KPIs.
• Encourage staff who are underperforming instead of demonising them.
• Both parties must interpret the KPI the same way so there is no confusion. Ensure there is a clear understanding.
• Be mindful that KPIs may change over the course of your business’s life, so ensure you regularly review KPIs.
SMART KPIs can help drive your business towards greater success. Implementing them properly will ensure your staff work to their full potential and your business goals are met.
The SMART method can be used to set goals for individual employees as well as the business as a whole. Learn more about setting realistic business goals.
