Importance of performance indicators in monitoring and evaluation

Have you set learning goals this year? Sales goals? Team goals? Business goals? A new year means new goals and typically bigger goals than the year before.

The best way to assess if you’re on track to reach company goals throughout the year is by identifying measurable key performance indicators (KPIs).

KPIs are often confusing and may seem abstract, especially if you’ve never heard of them before. However, understanding the advantages and disadvantages of performance indicators will help you realize why you need to track them in your workplace. 

In this blog, we’re looking at KPI importance, as well as KPI strengths and weaknesses.

Are you ready to learn about “What is a KPI for an employee?” 

Do you want to know how KPIs can elevate business success?

Let’s jump into the KPI pros and cons you need to know.

What Are KPIs and Why Are KPIs Important?

Key performance indicators are evaluation metrics that give you a pulse on a team or individual’s progress. They help you measure quantifiable objectives and goals.

If goals are the destination, KPIs are the road signs that keep you on track. If a road sign doesn’t tell you something you need to know, it’s irrelevant, right? KPIs let you know if you’re headed in the right direction (ideally, North, towards that sales goal).

A good KPI is SMART: Specific, Measurable, Achievable, Realistic, and Timely. 

For example, if your goal is to increase customer satisfaction, you might have your customer service team go through refresher training. To determine if the training is working, a specific KPI you may consider measuring is customer satisfaction rates. Tracking that KPI month-over-month for the next three months helps you understand how effective refresher training is for your customer service reps and if it positively impacts customer satisfaction.

Now that you know more about the importance of KPIs and their usefulness, let’s look at KPI advantages and disadvantages when measuring performance.

The Advantages of KPIs 

1. Close Learning Gaps

KPIs help you recognize and address learning gaps. If you’re not reaching an objective or goal, it may indicate that your employees need further training.

Let’s say you want to convert 20% more sales leads. You communicate the sales goal to your sales team, intending to achieve it by next quarter. However, after three months, you see no closing increases. Sales training helps your team understand the fundamentals of prospecting, selling, and closing, so every call becomes a realistic opportunity. 

Awareness of a skill gap allows you to begin training your employees accordingly. Setting a measurable KPI with a tangible outcome helps you evaluate employee performance and improvements post-training.

2. Empower Employees to Take Action

Empowering your employees to take action is another pro of KPIs. 

Your overall goal might be making more sales this year compared to last. How will you attain that, and how will your team know what to do? Clear KPIs drive your employees to action and direct them along the way.

A tangible KPI spoken by a sales director might be: “Send 30 sales emails every day” or “Follow-up with leads within 1-hour of the first contact.” The number of sales emails sent and the follow-up time frame are both specific, trackable KPIs. 

If you start to see results, then you’re on the right track. If you don’t see results, then revisit the goal(s), the KPIs you’re measuring on the way to that goal, and make pivots as necessary.

3. Measure Outcomes and Results

KPIs allow you to measure outcomes and results. A good KPI, by definition, should be measurable and trackable. Without a way to measure progress towards your goals, you can’t make improvements or adjustments.

Perhaps you attained your goal of increasing sale conversions by 20% for the year. Congrats! But how did you meet this goal? 

• Did every sales team member complete sales training? 
• Was your goal too low? 
• Did you have one superstar salesperson who accomplished most of the team’s goal?

On the other hand, if you didn’t reach your goal, why not?

• Was your goal too high? 
• Were there employee knowledge gaps?
• Did managers have difficulty streamlining the sales process?

Whether you reach a goal or not, it’s essential to know “why.” One of the major strengths of a KPI is its ability to measure whether certain training decisions paid off or fell flat. 

The Disadvantages of Performance Indicators

1. KPIs Need Time

One con of KPIs is that they don’t always offer actionable information immediately. 

If you invest in a new employee training program, you want to know that it’s making a difference. But training KPIs don’t show team transformations in a day. It may take a few months before seeing results, depending on your goal(s) and how often you’re tracking employee training KPIs.

As the saying goes, “A watched pot doesn’t boil.”

Don’t hit the panic button on your KPIs too early; give them time to heat up.

2. KPIs Have a High Learning Curve

KPIs are useful but don’t try to overload yourself with too many at once. If you’ve never identified and implemented KPIs before, it’s best to start with one or two. 

Have you ever decided to start working out after months of no physical activity? You get excited, get dressed, and go to the gym. You do legs, arms, abs, and cardio–it feels great! But then the next day arrives, everything hurts, and you don’t want to move. 

The same experience can happen with KPIs. One limitation of performance measurement that you may fall into is tracking so many KPIs that you become overwhelmed by all of the data. If you try to implement too many at one time, you’ll lose track and end up failing at all of them. This can leave you feeling frustrated and discouraged as a manager.

Start small and work your way up. As your comfort level creating and implementing KPIs increases, you can start adding more.

Overcome the Limitations of Performance Measurement

KPIs are a powerful tool in the toolbox of any business willing to invest in them. KPIs will help you identify learning gaps and break down large business goals into smaller, measurable data points.

Though there are both KPI advantages and disadvantages, the advantages far outweigh the disadvantages. Nothing drives business success like forming strong KPIs that lead your team triumphantly toward business goals.

When it comes to KPI pros and cons, we’re pros. 

We can help you understand KPIs, how to implement them, and track them for prolonged success. At Unboxed Training & Technology, we have a team of employee training consultants ready to help you upskill your virtual workforce.

Request a demo of our award-winning Social Learning Management System (LMS) to see how you can track measurable learning and development KPIs today.

Published February 4, 2019, updated February 15, 2022

Summary - It's easy to jump into what key performance indicators are long before understanding why they are important. If you need to better understand the why of KPIs, consider this your starting point.

My dad recently started asking this question in interviews with potential hires:

“What is 6 times 8?"

He asks this question not to see if candidates know their math, but to observe how they deal with this simple challenge.

The worst response he’s ever received was, “I didn’t know math was involved with this receptionist job.” And that’s not the only What the heck!? response he’s had.

I mention this because I think it says something about how people often perceive numbers in the workplace.

For a long time it’s been assumed that if your job title doesn’t imply “numbers" then there’s seriously no need for you to know them.

But the reality is that today’s data-driven economy means that numbers are important no matter what area of work you're in.

Perhaps part of the issue is that the portrayal of math in media and film isn't all that glamorous and is usually represented by a stressed-out businessman up late and agonizingly crunching numbers.

Or maybe it's more personal, such as those moments when we saw our parents worrying about a big report for their boss or, for me, those Saturday mornings I had to do my Kumon before going to hockey practice.

Whatever the cause(s), there exists a public perception that numbers are not only a chore, but a hassle.

Which is why this blog post will not be telling you which key performance indicators (KPIs) to track, but why you should track them in the first place.

Hint: numbers are a lot more human than you may think.

The value of KPIs on business objectives

KPIs are important to business objectives because they keep objectives at the forefront of decision making.

It’s essential that business objectives are well communicated across an organization, so when people know and are responsible for their own KPIs, it ensures that the business's overarching goals are top of mind.

KPIs also ensure that performance is measured not blindly in pursuit of the KPI but in relation to the larger business objectives. This means that every part of work is done with intentionality and for the right purpose.

How KPIs foster personal growth

Not every campaign or product update will reach their targets. But monitoring performance against those targets, be it good or bad, creates an environment of learning.

With KPIs, teams are able to see exactly how they are performing at any given moment. No longer do they need to wait for the end of a quarter or project to tabulate the results.

When you track KPIs, especially when you do so on a real-time KPI dashboard, you are able to ask what, why, how and when... and do so whenever. This makes learning from successes and failures a daily (rather than weekly or monthly) activity.

Another reason why KPIs are important for personal growth builds off the idea of increased morale. Allowing employees to monitor their performance and respond in the moment means that they are more likely to achieve their goals and better understand how to do so in the future.

This sense of continuous improvement allows people to achieve far more than they might think, which is essential for workplace satisfaction and continued personal growth.

The importance of KPIs for performance management

I’d say this last one is the definitive reason why key performance indicators are important.

It sums up all of the above reasons: what gets measured gets managed.

Employee morale, culture and capacity, among others, all contribute to performance. KPIs simplify performance management by allowing everyone to not only see what they’re doing, but what others are doing as well.

This transparency ensures everyone is working in the same direction, which simplifies lines of communication because the answer to “How are we doing?” is bundled into a clear number rather than hidden under spreadsheets and services or, worse yet, behind guesses. So tracking your sales KPIs in an open, transparent way to increase accountability.

Now let's go back to using KPIs during an interview process

How would you answer the following simple interview question:

"______, in your current role, what's your most important KPI? How did you select it, why does it matter, and how are you monitoring progress toward it?"

You pause. One pause turns to two. Two turns to a freeze.

And the freeze grows into a silence suggesting befuddlement.

Talk of KPIs is cheap

In the imagined scenario above, did your mind hone in on how you'd answer? Or did you feel scattered?

We write a lot about KPIs here at Mindful Metrics. If you've been a reader and subscriber long enough, you can likely rattle off the 5 or even ten most important KPIs in your industry without blinking.

But what about when it comes down to one? What about when you're pressed and need to select the single most important KPI for your line of work? The one that in many ways is a representation of your impact?

What KPI best represents how you drive the business forward?

Answer that.

Keep that answer somewhere safe. It will come in handy both for your own focused daily work and for when the time comes to communicate why you're doing what you're doing.

How did you select this KPI?

With the previous answer in hand, now is your time to tell a story. So, how did you choose that KPI from among so many others?

What challenges were you seeing? What challenge was the company or your team facing? What process did you use to select the right KPI for the situation?

It's not enough to know the KPI you are driving toward; you must know that KPI's story.

Why does this KPI matter?

Anne's question contained multitudes.

Cool, you answered the first and second parts, but why does this KPI ultimately matter? How is your pursuit of it improving the company's performance?

This is your chance to go beyond the internal company and/or departmental challenges you mentioned earlier. Paint a picture of the industry you're in.

Show Anne that you know the industry, that you know every inch of its landscape. You chose this KPI not just to solve some internal quibble, but to catapult your company ahead of its competitors.

Right?

How are you monitoring progress toward this KPI?

Lastly, now that you've made clear that this is the "most important KPI" for you, you're now tasked with conveying how you monitor it.

So, how are you gauging progress? How are you communicating this progress?

If you're using spreadsheets or perhaps an in-app or in-platform monitoring tool, great. Give Anne a glimpse into how you're using those methods and why you believe they are cutting-edge.

If you're using a KPI dashboard software, there's no need to make a case for cutting-edge. It's understood and you've likely earned a few bonus points as a result. But you'll still need to communicate how this method helps your pursuit.

Final KPI musings

When it comes to key performance indicators, we've always believed that the fewer you're tracking the better you're likely tracking them.

But what if it came down to one? What if, for a moment and in the wild world of business metrics, you had to choose a single KPI that you woke up and worked by, day in and day out?

Which would you choose? How did you choose it? Why does it matter? How are you monitoring it?

This blog was updated from its original post on July 2, 2017