KPIs or Key Performance Indicators: Can they be used against you?

Where you can’t achieve the KPIs you’ve been set, they can lead to your constructive dismissal, where you feel forced to resign, or to your unfair dismissal, where you’re dismissed because of your apparent performance shortcomings.

In fact, the problem often actually lies in the ways the KPIs have been drawn up, rather than in your performance. So here we ask whether and in what ways KPIs can have a negative effect on your performance.

See also our page on Performance improvement procedures and plans for a wider perspective.

What are KPIs?

KPIs – short for Key Performance Indicators – are a means used by employers to measure employee performance. They are intended to align with business growth and to produce results so that improved strategic actions and decisions can be taken by management.

At an individual employee level, they are used to help you identify your existing achievements, make improvements and hit performance targets agreed upon between you and your line manager.

KPIs tend to be used to track progress in essential business areas such as:

Customers
Measuring customer satisfaction and ensuring service levels are maintained.

Quality control
Checking that internal processes and standards are adequate and are followed before the service or product reaches the customer.

Employees
Measuring the standards expected of employees, their competencies and job satisfaction.

Profits
Helping to control costs and improve efficiency.

 

What are good KPIs?

‘Good’ KPIs are developed from the strategic goals of the business. When devised properly and used correctly, they should be applicable to a particular department or project and its individual employees. Perhaps most importantly, they should be easy to understand.

In addition, they should always be ‘Smart’. That’s an acronym for:

Specific and related to a clearly defined target which is not open to misinterpretation.

Measurable and use means for measuring their achievement that are clear, objective and unambiguous. KPI measurement should not just be based on the subjective judgement of a line manager or equivalent.

Achievable and Realistic in the time allocated, given your skills/experience in the key area.

Timely and based on external market conditions as they exist now, not on how they were last year or the year before.

Who sets KPIs?

At an organisational level, KPIs are used to measure the overall success of the business against its targets, so it’s typically directors who set broad KPIs that will help meet those targets.

They will liaise with heads of departments to determine how best each department can contribute to the targets. From there, the KPIs will be developed for each team and/or individual working within the department.

There may be different levels of KPIs set within each department, depending on the experience of the individual employee. For example, a newcomer may have lower targets compared with someone who has a more senior role.

In an ideal situation, there will be some discussion between you and your manager about the KPIs assigned to you. This will help you agree on a balance between business targets and what you can realistically achieve within the timescale of the KPIs.

 

KPIs and performance improvement procedures

KPIs are sometimes used in a non-constructive way when included in a Performance Improvement Plan or Performance Improvement Procedure (PIP).

While they are supposed to be used as a positive measurement tool to help you get back on track and improve your performance, poor KPIs can also ultimately force you to resign and leave your job.

If you are put in this position, you may well have a claim for constructive unfair dismissal. See our guide on Constructive dismissal for more.

Impact of performance improvement procedures

A PIP may be introduced by your employer if they believe you are not consistently meeting your KPI targets or not showing enough signs of performance improvement.

This sort of procedure will usually include a new set of KPIs that have to be met within a fixed time scale (typically between 30 and 90 days) and will detail how your performance will be managed, monitored and measured during this period.

The introduction of a PIP can lead to a break in trust between you and your employer, even if all the KPIs are successfully met and you pass the process.

If your employer was concerned enough about your performance to put you into a formal procedure, it wouldn’t be unreasonable to think that they may actually want you to leave.

Moreover, if you were to stay, what would the chances be of your performance being reviewed in the same way again in future?

 

Examples of poor KPIs

While there are plenty of good KPIs that can be used to help businesses and employees (see above), there are also many that can prove ineffective and damaging. For example:

Being set excessive targets

A straightforward example of the poor use of KPIs is when you are asked to meet an excessive number of targets.

This sort of situation not only affects you and your feelings towards your job, but it can also adversely impact the company and the kind of end results they can achieve.

For example, if you work in a sales role and have a long list of KPIs to meet every day, week and month, such as call targets, client meetings, proposals etc. they can quickly become a burden.

There is a danger that you start working just to meet the KPI targets themselves, rather than focusing on the quality of your work, which will adversely affect your results.

Using inaccurate or out-of-date KPIs

KPIs that are not regularly reviewed for accuracy or for being up to date can also create problems. KPIs are supposed to result in actionable data, so just because they were relevant 12-24 months ago, it doesn’t mean they still are.

An out-of-date KPI puts you at an unfair disadvantage and makes it even harder to do your job to the expected standard.

For example, if you are given KPIs that have just been handed down from one set of employees to another over time, the likelihood is that you are working to targets that are no longer relevant to the company’s goals or to your job role.

So, even if you hit the KPI targets, the final outcome may still not be satisfactory because the metrics are based on achieving an outdated goal.