September 5, 2025 • 25 mins
Ever been blindsided during a performance review when your boss asks about KPIs you didn't even know existed? You're not alone. The world of Key Performance Indicators can seem mysterious and intimidating, but mastering these metrics is essential for leadership success.
In this revealing discussion, hosts John Wandolowski and Greg Powell demystify the often misunderstood concept of KPIs. They break down exactly what these quantifiable measurements are and why they matter: driving performance improvements, enabling data-driven decisions, and ensuring your daily work aligns with broader organizational goals. Far from being abstract corporate jargon, KPIs directly impact your compensation, career trajectory, and effectiveness as a leader.
The hosts share candid stories about their own experiences, including John's eye-opening moment when he was asked about KPIs after a year on the job—without ever having discussed them previously. They explore how these metrics are used in various industries, from electrical management to healthcare, and provide practical examples that bring these concepts to life.
Perhaps most importantly, they offer actionable strategies for taking ownership of your KPIs rather than playing victim to them. You'll learn the five key steps of an effective KPI process, how to approach management about metrics that don't make sense, and why creating artificially easy KPIs to "game the system" is a strategy that will ultimately backfire. The conversation emphasizes that regular monitoring—not just annual reviews—is crucial for meaningful performance management.
Whether you're new to leadership or looking to enhance your strategic approach to performance metrics, this episode provides the knowledge and tools you need to confidently navigate the world of KPIs. Remember: these numbers shouldn't be a surprise, but rather a compass that guides your leadership journey.
Presented by John Wandolowski and Greg Powell
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:13):
Well, hello and welcome to our podcast, success
Secrets and Stories.
I'm your host, john Wondoloski,and I'm here with my co-host
and friend, greg Powell.
Greg, hey, everybody.
And when we put together thispodcast, we wanted to put out a
helping hand and help that nextgeneration and help answer the
(00:35):
question of what does it mean tobe a leader?
Today, we want to talk about asubject that I think supports
that concept, about a subjectthat I think supports that
concept.
So today we're going to talkabout abbreviations and
something that I think anytimeyou go into an organization,
(00:55):
there's always abbreviationsthat you have to learn.
One of the humors that I had isin the hospital world, they
actually had a separate book ofabbreviations, and as a new
manager, you're going to hearabbreviations and you need to
learn them.
But one of them is veryimportant KPI key performance
indicators.
And what was interesting is, Ithink the first thing you should
(01:19):
understand is that they're aquantifiable measurement that
tracks the efficiency of yourorganization achieving the
statistical goals, providingclear and measurable benchmarks
for success.
Kpis are important because theydrive the performance
improvements, enable data-drivendecisions and ensure that daily
(01:40):
tasks and efforts to align tomore of the broader
organizational goals.
So if you're thinking I don'tcare about KPIs, this is not in
my core description of my job.
I'm just going to let the chipsfall where they may, and
wherever the KPIs land, theyland Wrong.
It's the wrong way to do it,because you're going to just
(02:03):
plain get surprised by what itis that you're going to get
handed, and we'll talk about ita little bit later.
How I learned about KPIs andwhy this is, I think, a very
interesting subject to discuss.
When you're trying to find outwhat it means to be in
leadership, this is one of thosekey components that you usually
(02:23):
find out at the end of theprocess rather than the
beginning.
So let's just talk about it alittle bit in terms of
definitions so that we can be alittle bit more precise, trying
to find quantifiable matrix.
Kpis are specific.
They're measurable, such asprofit margins or customer
(02:44):
satisfaction scores or thewebpage views or whatever else
you use to evaluate performance.
Data is the key, and how datais collected is important.
Goal orientation of a positiveimpact If a KPI is a good KPI,
(03:12):
it can drive profit and it candrive better performance.
The other element of KPIslooking forward and looking past
.
The other element of KPIs,looking forward and looking past
, so you have the ability to seehow the indicators have
actually affected the past andpredicted the future, to see
(03:33):
what has merit, what are a goodmeasurement.
So things like sales forproducts or pipe or whatever it
is that you're selling.
You understand the indicatorsand how they push your
organization.
And then there's the laggingindicators that actually have
(03:54):
nothing to do with revenue andat the same time they're
affecting your performance orthey're affecting your bottom
line of your payroll and it maybe time to walk away from those
kind of energies and findanother place to put the energy
of the department.
So energy in a department is aninteresting segue, greg, for
(04:16):
you to talk about how you'veseen it work, especially in the
electrical industry at one point.
Yes, thank, you, john.
Speaker 2 (04:23):
So why are KPIs important in a business
environment?
So you think about, first, it'sjust plain important.
Number two, it actuallymeasures performance.
And number three, and veryimportant, it's quantitative.
So let's talk about drivingperformance.
So KPIs highlight the metricsthat truly move the needle.
They direct attention to theimpactful initiatives and drive
(04:44):
performance improvement.
They also enable data-drivendecisions.
If you're not making decisionswith data, you might be making
bad decisions.
So instead of relying on yourgut right, leaders need to use
clear, relevant KPIs to makeinformed strategic and
operational decisions.
And you also want to make sureeverybody's on the same page.
(05:04):
Right, you want to ensurestrategic alignment.
They ensure that individual andthe team efforts are connected
together to the company'soverall strategic goals, and
that creates a unified direction.
Now let's talk a little bitabout fostering continuous
improvement, because it's reallynot a one-and-done idea.
Right, you want to regularlytrack KPIs, and that allows
(05:25):
businesses to identify theweaknesses right beforehand,
understand root causes ofperformance declines, do some
detective work and make timelyadjustments, creating a culture
of ongoing learning anddevelopment, john so how many
times in the electrical industrywere KPIs actually a meeting?
Speaker 1 (05:45):
It wasn't once a year .
How many times did you guysmeet to talk?
Speaker 2 (05:49):
about KPIs.
So, john, with the board ofdirectors, we would talk no less
than three times, maybe fourtimes, a year, but within the
organization, between managersand their staff, every month we
looked at the KPIs you have toExactly.
Foster continuous improvement.
Also enhance adaptability.
Kpis provide a framework forfeedback and growth right how to
(06:09):
get information in and helppeople grow.
It allows businesses to adaptto changing conditions, such as
things like shifts in consumerdemand or market dynamics,
because things do change.
They're not always static andyou want to remain competitive,
so you need that adaptability.
And also KPIs improve resourceallocation by clearly showing
(06:30):
where efforts are most effective.
Kpis help businesses allocateresources more efficiently to
the areas that will yield thehighest results.
Speaker 1 (06:38):
Yeah, and okay, so it was kind of funny.
The first time I heard KPIs itwas after I had been with an
organization for like 12 monthsand they asked me if I hit my
KPIs and I asked what?
What is a KPI?
You guys never had that in anyconversation in 12 months and
(06:59):
KPIs are clearly something thatyou have to be involved with.
Yeah, kpis are clearlysomething that you have to be
involved with.
If they say that there's ameasurable matrix in order to
align performance, you shouldhave been collecting that data.
If you have basically a blankstare when they ask what is the
(07:22):
performance, you're not going togo very far in a conversation.
The other part that's reallyinteresting.
Bonuses yes, they sometimes areapplied to leadership positions
.
They're based on KPI compliance.
It's a reward for active,effective management, it's a
quantifiable target and it's anelement of business success.
Kpis are really part of yourbase pay to ensure that a fixed
(07:46):
salary reflects performance andmarketing standards and is
reflecting something in terms ofwhat you have done as a reward
for the efforts to keep thecompany online.
Greg, you've seen this happenin the past, where people
haven't really been involved incollecting their data and start
(08:07):
to play the victim card.
Speaker 2 (08:10):
So, John, let me talk a little bit more about how KPI
is linked to compensation.
Speaker 1 (08:13):
Yeah.
Speaker 2 (08:15):
So performance measurement KPIs offer objective
data on how effectively anemployee or team is meeting
their goals.
So objective versus subjectivedata, very important.
Motivation and incentive.
If you set clear performancetargets, kpis are going to
motivate employees to excel notjust get by, but excel and work
towards the objectives,providing a direct incentive for
(08:37):
achieving them.
How about alignment withbusiness goals?
Kpis ensure that the efforts ofthe employees and teams are
focused on achieving thecompany's strategic and
operational objectives, and thisone, I think, is really, really
important.
Transparency, right, notplaying a shell game here.
I want to make sure everybodyknows what's going on.
So, being transparent and fair,well-defined KPIs create a
(08:59):
transparent system whereemployees understand how their
pay is determined, leading togreater fairness and improved
morale.
And even though you'd like tothink they're just there because
they enjoy doing their job,they want to get paid.
Speaker 1 (09:11):
They want to get paid fairly right and so also the
ethical piece starts to kick inin terms of the fairness of the
organization, especially if it'sa publicly traded stock.
You want to make sure that youcan demonstrate that kind of
fairness approach and how you'rehandling purchasing and how
you're handling the books ingeneral.
Speaker 2 (09:33):
And one last piece on the link to compensation
customization.
So don't sit there and say,well, my organization really
can't create KPIs.
It's not a standard kind oforganizational process.
That's not correct.
Kpis can be tailored tospecific roles and specific
departments.
It allows compensationstructures to be customized to
different job functions anddifferent levels of
(09:54):
responsibility, so everyone canparticipate in the use of KPIs.
Speaker 1 (09:59):
And what was interesting about KPIs for me is
especially when I was a newmanager and the first time that
I was dealing with a potentialbonus.
I didn't understand the KPIprocess and just to talk about
how it was applied, the processis a variable pay that is
(10:23):
inherent in terms of KPIs thatprovide a matrix to determine
how much an employee receives,or their targets, and the
employee is informed in terms ofa specific performance target
that must be achieved in orderto qualify for the bonus.
And then there's what I guessI'm trying to allude to is
(10:43):
direct results.
They're tying the bonus intoachievable KPIs that create a
link between performance andreward.
If you're not aware of thetargets, you should at least
have the organization workingagainst the targets, as, being a
new manager, there should bepeople that are working on
(11:05):
things that are important to theorganization.
Kpis for your staff shouldn't bea surprise.
If it is a surprise for them,you have a bigger issue and KPIs
can affect the bottom line, thetrue base pay.
Bigger issue and KPIs canaffect the bottom line, the true
base pay.
They'll do a market alignmentof a KPI, assessing the market
competitiveness of anorganization, to enhance the
(11:26):
reward system, to influencedecisions based on not only
paying the talent but attractingtalent and retaining talent.
And when you're dealing withKPIs, some organizations,
straight up, just put it in thenet.
Some organizations start withthe conversation of a KPI and
they'll often talk about what isfixed, what is performance
(11:47):
related, what is influenced overtime and how KPIs are in the
review process and they provideeven the scales that are
associated with adjustments forsalaries.
Those are all kind of importantthings.
So KPIs are really evidence ofperformance for salary
(12:07):
adjustments and promotions, andI can't stress it enough saying
it should not be a surprise toyou, greg Right.
Speaker 2 (12:16):
In yearly performance reviews, and John and I have
talked about performance reviewsand career reviews.
Key performance indicators arereally important.
They're used as objective,quantifiable measures to assess
how well an employee or the teamthat they're on have met their
goals, providing a data-drivenagain basis for evaluating
success and identifying areasfor improvement.
(12:36):
Kpis offer clear, unbiasedbenchmarks for performance.
They ensure alignment withstrategic business objectives by
measuring progress againsttargets related to productivity,
customer satisfaction,efficiency.
I remember back in the day wewould measure quality.
So many different kinds ofmeasures fall under KPIs, so my
(12:56):
performance in achieving theKPIs will be on my yearly review
.
Oh my gosh, that's right andthat's where you want it to be.
All right, I'm sorry, buthere's some examples of KPIs and
performance reviews.
Let's look at the salesdepartment how about total sales
revenue?
How about generating new leads,that being a KPI right?
And let's never forget customerconversion rate right, Very
(13:21):
important.
Now let's take a look atcustomer service CSAT right.
Customer Service SatisfactionScores.
Average response time to callcenter how quickly do they get
back to people?
First-time call resolutions howmany calls does it take to get
resolution?
Let's talk about productivityPercentage of tasks that are
completed on time.
And then let's take a look atproject completion rate.
(13:42):
And then, finally, efficiency.
Let's take a look at thereduction in overtime hours and
cost per unit.
Speaker 1 (13:49):
John, a KPI isn't what you expected.
A KPI doesn't sound likesomething that your department
should be doing.
Here's the newsflash it's yourjob to make the new KPIs.
If you don't think that they'rerelevant, a little bit of what
you should understand is whatare the key steps of a KPI
(14:11):
process, so that there'sactually some steps to
understand if you're going tobasically argue with it or
create new ones.
What's involved?
You have things likeidentifying the KPI, creating
the KPI, evaluating KPI,defining change and assessing
(14:32):
where you're at.
So let's just step back and goover those one more time To
identify you're setting up arelevant KPI for tracking the
company's performance.
Creating something means thatyou need to have a way of
measuring it, and whether it'sbig dashboards or scoreboards or
, in my case, energy output,volume of energy used versus the
(14:55):
energy conservation concepts,you have to do an evaluation.
That, by the way, is the thirdstep Evaluating how well these
business goals actually move thebusiness and whether they're a
relevant KPI.
That, by the way, is yourwindow on how to change
something if you don't thinkit's a properly applied KPI.
The fourth step is change.
(15:18):
Whether it's a strategy,whether it's a process, whether
it's an enhancement to equipment, whether it's even a change of
equipment in order to make itsomething different.
All those things are part ofhow the KPI can be enhanced or
improved upon.
And then there's an assessment.
Now you've changed your KPI andyou need to talk about how that
goal is altered and what isinvolved in order to show that
(15:41):
performance is actually beingaccomplished.
So there's obviously a lot moreto the discussion of KPIs.
The thing is, you can't playvictim.
You have to get involved inKPIs.
If they don't make sense,nobody's going to hold your hand
and explain it.
Some other secrets the annualassessment is not when you do
(16:05):
your measurement.
It's ongoing.
It's ongoing.
It's ongoing.
You have to be doing this.
In my world, we were doing itevery month as a minimum, and I
had people assembling responsesto KPIs weekly on energy
management.
So, depending upon how the goalis actually measured, they
(16:26):
actually had people checkingenergy daily and that's all.
To make yourself more proactivein order to make the changes so
that you're spending the leastamount of money, there's that
KPI magic dust You're reducingcosts and however, proficiency,
whatever the assets, the goals,the measurement equipment that
(16:48):
you need in order to accomplishthat end result, you better be
asking for it because it's aclear requirement If there are
too many KPIs.
It is a conversation thatshould be had at the beginning
so that it's more tangible forthe department to actually be
effective in order to make achange.
And we have to be carefulbetween an individual KPI and a
(17:12):
department KPI and a company KPI, because sometimes they drift
in and drift out, depending uponwhether you're managing that
process or not.
Some organizations actuallyhave people that are dedicated
to creating KPIs and I thinkthat's the other piece that I
haven't seen in my experience,but I know at other
organizations that does happen.
(17:33):
But in my world, if you're notauthoring it, you're just going
to play victim and the lastthing you want to do is sit in a
review and have the KPIs thatyou haven't been measuring and
everybody gets surprised as theoutput at the end of the year.
It's not a good KPI and itshouldn't be a gotcha game at
(17:57):
the end of the year either.
These are matrix based orperformance based goals that you
should be dealing with and ifyou're overwhelmed and it's too
difficult, they'd like to dothings called stretch KPIs.
So if you don't understand that, if you're in a yes or no KPI
(18:18):
or a stretch goal KPI, youbetter get that information on
the front end as quickly as youcan, because you can go through
a KPI evaluation and not meetany of the requirements and you
don't want to be shocked to hearthat you've actually done a
good job.
And you don't want to beshocked to hear that you've
(18:46):
actually done a good job becauseit's basically going to show
your hand that you've really notbeen involved in what the KPI
process was actually trying todo.
It helps focus employees sothat they control the end result
and they can influence the endresult.
That's the bottom line andyou're creating a matrix that
has impact and it has somemeaning.
Stay adaptable.
Regular assessments of KPIs canensure that the remaining
relevant and involved businessobjectives are being met.
(19:07):
A KPI should have a sense of astart at the beginning of the
year and show the change orprogress as it goes throughout
the year.
Using KPIs is just one toolthat helps in terms of
management.
It's not the only tool.
You have to make sure thatthere are soft skills and there
are performance-based,data-driven ideas.
(19:30):
Kpis are different type ofapplications showing that you're
doing a good job performingtheir task.
In my world I had people whowere retiring and they were
asking what was I doing to builda bench?
How are we preparing people toactually be advanced?
And it was a KPI.
(19:50):
That is a very forward thinkingkind of KPI and a great example
of something that we should bedoing in today's current KPI
environment.
Great.
Speaker 2 (20:02):
So let's talk about the what if?
What if the organization youwork for does not have any KPIs
for your particular businessapplication?
Should you just create someeasy ones to see if you could
get a pay increase?
You know, kind of sandbag alittle bit.
No, don't do that.
It's a bad idea to create easyKPIs simply to get a pay
increase.
Such a tactic is transparent tomanagement and can damage your
(20:25):
credibility.
Get a pay increase.
Such a tactic is transparent tomanagement and can damage your
credibility.
The better, more ethical and,ultimately, more effective
strategy is to proactivelycreate meaningful metrics that
demonstrate your real value tothe company.
So what are the risks ofsetting easy KPIs?
First and foremost, it damagesyour personal credibility.
Creating self-serving, easilyachieved goals will signal that
(20:49):
you are more focused on personalgain than the company's success
.
This erodes trust with yourmanager and leadership.
It also devalues your role as aleader.
By using simplistic metrics,you miss the opportunity to
highlight the complexity andstrategic importance of your
work.
So you're selling you and yourdepartment short.
Also, it can be seen asdisingenuous.
(21:10):
Your manager may perceive thisas an attempt to game the system
rather than a genuine effort toimprove performance, which
could harm future reviewoutcomes.
And it's probably an ethicalquestion here as well, if you're
willing to kind of quote gamethe system.
Speaker 1 (21:26):
Especially if you think you're putting one over on
them and it's transparent topeople who have been doing it
for a long time, you're probablynot going to fool them.
So, when you're thinking abouta better strategy and really,
how do you handle it beingproactive?
I'm going to try to break itdown quickly for you.
(21:46):
Understand the company goalsand if the KPI doesn't really
have anything to do with thebusiness challenge, it Two is
developing data-driven matrix.
I will tell you right now themore that you can spend time to
develop a database matrix thatyou can show how the data was
collected minimizesinterpretations, and that's a
(22:07):
KPI that is fair.
If you're not hitting the mark,it's an honest way of trying to
communicate the issues, but youbetter be prepared to explain
why you didn't hit those marks.
It's also the opportunity tosee whether it's something that
you need to redo because the KPIisn't effective in terms of
what you want as an end resultimproving the business.
(22:28):
That's an example of where youneed to take responsibility, and
probably the last part is themost important part.
Kpis is a strategic decision.
You're supposed to be talkingto your manager on whether the
KPIs actually make sense.
If they don't, you have to pickup the mantle and run into the
(22:50):
office and say we need to sitdown and talk about this because
the KPIs don't make sense.
And you know, greg, how much ofa surprise is it to jump into
the manager's office saying KPIsand not giving them at least a
heads up on what you're going tobe talking about.
The pros and the cons.
Speaker 2 (23:08):
Yeah, john, you absolutely need to give them a
little heads up and let them getprepared for responding to the
question about the KPIs.
You don't want to just catchthem off guard because nothing
good is going to come from that.
So if you're a professional,you want to be even a bigger
leader in the future.
Give them a little advancednotice.
(23:30):
Let them know what you'relooking for, give them some time
to put it together and thenmake sure that you're prepared
as well to make it a productiveconversation when you get to
talking about creating KPIs.
Speaker 1 (23:35):
Yeah, and one of the things that we've talked about
in the past is an SBAR reportsituation, background analysis,
recommendation One page, supersimple.
If you're going to sit down andtalk about a KPI, that doesn't
make sense.
Hopefully you don't have abunch of them to talk about, but
you would write one SBAR reportfor each KPI that you want to
(23:58):
talk about and try not to mixthem clearly because you want to
be able to make those changes.
To mix them clearly because youwant to be able to make those
changes, and you'll get more ofa clear kind of support or a
pushback if you are asking thosequestions on an SBAR report
before you sit down with themanager, so that they know what
(24:18):
you're going to talk about andthey know what you've discovered
.
And now you have a veryproductive meeting.
So hopefully this has been somehelp and, if you like what
you've heard, I've written abook called Building your
Leadership Toolbox and we talkabout tools like this and it's
(24:39):
available on Amazon and BarnesNoble and other sites.
The podcast is what you've beenlistening to.
Thank you so much.
It's also available on Apple,google and Spotify.
A lot of what we talk about isfrom Dr Durst and his MBR
program.
If you'd like to know moreabout Dr Durst, you can find out
on successgrowthacademycom, andif you'd like to contact us,
(25:01):
please send me a line.
That's wando75.jw at gmailcom.
And the music is brought to youby my grandson, so we want to
hear from you.
Drop me a line, tell me what'sgoing on, what you like and what
you would like to hear about.
It has always helped us tocreate content.
(25:21):
Thanks, greg.
This was fun.
Thanks, john, as always.
Next time, yeah.
Well, hello and welcome to our podcast, success
Secrets and Stories.
I'm your host, john Wondoloski,and I'm here with my co-host
and friend, greg Powell.
Greg, hey, everybody.
And when we put together thispodcast, we wanted to put out a
helping hand and help that nextgeneration and help answer the
(00:35):
question of what does it mean tobe a leader?
Today, we want to talk about asubject that I think supports
that concept, about a subjectthat I think supports that
concept.
So today we're going to talkabout abbreviations and
something that I think anytimeyou go into an organization,
(00:55):
there's always abbreviationsthat you have to learn.
One of the humors that I had isin the hospital world, they
actually had a separate book ofabbreviations, and as a new
manager, you're going to hearabbreviations and you need to
learn them.
But one of them is veryimportant KPI key performance
indicators.
And what was interesting is, Ithink the first thing you should
(01:19):
understand is that they're aquantifiable measurement that
tracks the efficiency of yourorganization achieving the
statistical goals, providingclear and measurable benchmarks
for success.
Kpis are important because theydrive the performance
improvements, enable data-drivendecisions and ensure that daily
(01:40):
tasks and efforts to align tomore of the broader
organizational goals.
So if you're thinking I don'tcare about KPIs, this is not in
my core description of my job.
I'm just going to let the chipsfall where they may, and
wherever the KPIs land, theyland Wrong.
It's the wrong way to do it,because you're going to just
(02:03):
plain get surprised by what itis that you're going to get
handed, and we'll talk about ita little bit later.
How I learned about KPIs andwhy this is, I think, a very
interesting subject to discuss.
When you're trying to find outwhat it means to be in
leadership, this is one of thosekey components that you usually
(02:23):
find out at the end of theprocess rather than the
beginning.
So let's just talk about it alittle bit in terms of
definitions so that we can be alittle bit more precise, trying
to find quantifiable matrix.
Kpis are specific.
They're measurable, such asprofit margins or customer
(02:44):
satisfaction scores or thewebpage views or whatever else
you use to evaluate performance.
Data is the key, and how datais collected is important.
Goal orientation of a positiveimpact If a KPI is a good KPI,
(03:12):
it can drive profit and it candrive better performance.
The other element of KPIslooking forward and looking past
.
The other element of KPIs,looking forward and looking past
, so you have the ability to seehow the indicators have
actually affected the past andpredicted the future, to see
(03:33):
what has merit, what are a goodmeasurement.
So things like sales forproducts or pipe or whatever it
is that you're selling.
You understand the indicatorsand how they push your
organization.
And then there's the laggingindicators that actually have
(03:54):
nothing to do with revenue andat the same time they're
affecting your performance orthey're affecting your bottom
line of your payroll and it maybe time to walk away from those
kind of energies and findanother place to put the energy
of the department.
So energy in a department is aninteresting segue, greg, for
(04:16):
you to talk about how you'veseen it work, especially in the
electrical industry at one point.
Yes, thank, you, john.
Speaker 2 (04:23):
So why are KPIs important in a business
environment?
So you think about, first, it'sjust plain important.
Number two, it actuallymeasures performance.
And number three, and veryimportant, it's quantitative.
So let's talk about drivingperformance.
So KPIs highlight the metricsthat truly move the needle.
They direct attention to theimpactful initiatives and drive
(04:44):
performance improvement.
They also enable data-drivendecisions.
If you're not making decisionswith data, you might be making
bad decisions.
So instead of relying on yourgut right, leaders need to use
clear, relevant KPIs to makeinformed strategic and
operational decisions.
And you also want to make sureeverybody's on the same page.
(05:04):
Right, you want to ensurestrategic alignment.
They ensure that individual andthe team efforts are connected
together to the company'soverall strategic goals, and
that creates a unified direction.
Now let's talk a little bitabout fostering continuous
improvement, because it's reallynot a one-and-done idea.
Right, you want to regularlytrack KPIs, and that allows
(05:25):
businesses to identify theweaknesses right beforehand,
understand root causes ofperformance declines, do some
detective work and make timelyadjustments, creating a culture
of ongoing learning anddevelopment, john so how many
times in the electrical industrywere KPIs actually a meeting?
Speaker 1 (05:45):
It wasn't once a year .
How many times did you guysmeet to talk?
Speaker 2 (05:49):
about KPIs.
So, john, with the board ofdirectors, we would talk no less
than three times, maybe fourtimes, a year, but within the
organization, between managersand their staff, every month we
looked at the KPIs you have toExactly.
Foster continuous improvement.
Also enhance adaptability.
Kpis provide a framework forfeedback and growth right how to
(06:09):
get information in and helppeople grow.
It allows businesses to adaptto changing conditions, such as
things like shifts in consumerdemand or market dynamics,
because things do change.
They're not always static andyou want to remain competitive,
so you need that adaptability.
And also KPIs improve resourceallocation by clearly showing
(06:30):
where efforts are most effective.
Kpis help businesses allocateresources more efficiently to
the areas that will yield thehighest results.
Speaker 1 (06:38):
Yeah, and okay, so it was kind of funny.
The first time I heard KPIs itwas after I had been with an
organization for like 12 monthsand they asked me if I hit my
KPIs and I asked what?
What is a KPI?
You guys never had that in anyconversation in 12 months and
(06:59):
KPIs are clearly something thatyou have to be involved with.
Yeah, kpis are clearlysomething that you have to be
involved with.
If they say that there's ameasurable matrix in order to
align performance, you shouldhave been collecting that data.
If you have basically a blankstare when they ask what is the
(07:22):
performance, you're not going togo very far in a conversation.
The other part that's reallyinteresting.
Bonuses yes, they sometimes areapplied to leadership positions
.
They're based on KPI compliance.
It's a reward for active,effective management, it's a
quantifiable target and it's anelement of business success.
Kpis are really part of yourbase pay to ensure that a fixed
(07:46):
salary reflects performance andmarketing standards and is
reflecting something in terms ofwhat you have done as a reward
for the efforts to keep thecompany online.
Greg, you've seen this happenin the past, where people
haven't really been involved incollecting their data and start
(08:07):
to play the victim card.
Speaker 2 (08:10):
So, John, let me talk a little bit more about how KPI
is linked to compensation.
Speaker 1 (08:13):
Yeah.
Speaker 2 (08:15):
So performance measurement KPIs offer objective
data on how effectively anemployee or team is meeting
their goals.
So objective versus subjectivedata, very important.
Motivation and incentive.
If you set clear performancetargets, kpis are going to
motivate employees to excel notjust get by, but excel and work
towards the objectives,providing a direct incentive for
(08:37):
achieving them.
How about alignment withbusiness goals?
Kpis ensure that the efforts ofthe employees and teams are
focused on achieving thecompany's strategic and
operational objectives, and thisone, I think, is really, really
important.
Transparency, right, notplaying a shell game here.
I want to make sure everybodyknows what's going on.
So, being transparent and fair,well-defined KPIs create a
(08:59):
transparent system whereemployees understand how their
pay is determined, leading togreater fairness and improved
morale.
And even though you'd like tothink they're just there because
they enjoy doing their job,they want to get paid.
Speaker 1 (09:11):
They want to get paid fairly right and so also the
ethical piece starts to kick inin terms of the fairness of the
organization, especially if it'sa publicly traded stock.
You want to make sure that youcan demonstrate that kind of
fairness approach and how you'rehandling purchasing and how
you're handling the books ingeneral.
Speaker 2 (09:33):
And one last piece on the link to compensation
customization.
So don't sit there and say,well, my organization really
can't create KPIs.
It's not a standard kind oforganizational process.
That's not correct.
Kpis can be tailored tospecific roles and specific
departments.
It allows compensationstructures to be customized to
different job functions anddifferent levels of
(09:54):
responsibility, so everyone canparticipate in the use of KPIs.
Speaker 1 (09:59):
And what was interesting about KPIs for me is
especially when I was a newmanager and the first time that
I was dealing with a potentialbonus.
I didn't understand the KPIprocess and just to talk about
how it was applied, the processis a variable pay that is
(10:23):
inherent in terms of KPIs thatprovide a matrix to determine
how much an employee receives,or their targets, and the
employee is informed in terms ofa specific performance target
that must be achieved in orderto qualify for the bonus.
And then there's what I guessI'm trying to allude to is
(10:43):
direct results.
They're tying the bonus intoachievable KPIs that create a
link between performance andreward.
If you're not aware of thetargets, you should at least
have the organization workingagainst the targets, as, being a
new manager, there should bepeople that are working on
(11:05):
things that are important to theorganization.
Kpis for your staff shouldn't bea surprise.
If it is a surprise for them,you have a bigger issue and KPIs
can affect the bottom line, thetrue base pay.
Bigger issue and KPIs canaffect the bottom line, the true
base pay.
They'll do a market alignmentof a KPI, assessing the market
competitiveness of anorganization, to enhance the
(11:26):
reward system, to influencedecisions based on not only
paying the talent but attractingtalent and retaining talent.
And when you're dealing withKPIs, some organizations,
straight up, just put it in thenet.
Some organizations start withthe conversation of a KPI and
they'll often talk about what isfixed, what is performance
(11:47):
related, what is influenced overtime and how KPIs are in the
review process and they provideeven the scales that are
associated with adjustments forsalaries.
Those are all kind of importantthings.
So KPIs are really evidence ofperformance for salary
(12:07):
adjustments and promotions, andI can't stress it enough saying
it should not be a surprise toyou, greg Right.
Speaker 2 (12:16):
In yearly performance reviews, and John and I have
talked about performance reviewsand career reviews.
Key performance indicators arereally important.
They're used as objective,quantifiable measures to assess
how well an employee or the teamthat they're on have met their
goals, providing a data-drivenagain basis for evaluating
success and identifying areasfor improvement.
(12:36):
Kpis offer clear, unbiasedbenchmarks for performance.
They ensure alignment withstrategic business objectives by
measuring progress againsttargets related to productivity,
customer satisfaction,efficiency.
I remember back in the day wewould measure quality.
So many different kinds ofmeasures fall under KPIs, so my
(12:56):
performance in achieving theKPIs will be on my yearly review
.
Oh my gosh, that's right andthat's where you want it to be.
All right, I'm sorry, buthere's some examples of KPIs and
performance reviews.
Let's look at the salesdepartment how about total sales
revenue?
How about generating new leads,that being a KPI right?
And let's never forget customerconversion rate right, Very
(13:21):
important.
Now let's take a look atcustomer service CSAT right.
Customer Service SatisfactionScores.
Average response time to callcenter how quickly do they get
back to people?
First-time call resolutions howmany calls does it take to get
resolution?
Let's talk about productivityPercentage of tasks that are
completed on time.
And then let's take a look atproject completion rate.
(13:42):
And then, finally, efficiency.
Let's take a look at thereduction in overtime hours and
cost per unit.
Speaker 1 (13:49):
John, a KPI isn't what you expected.
A KPI doesn't sound likesomething that your department
should be doing.
Here's the newsflash it's yourjob to make the new KPIs.
If you don't think that they'rerelevant, a little bit of what
you should understand is whatare the key steps of a KPI
(14:11):
process, so that there'sactually some steps to
understand if you're going tobasically argue with it or
create new ones.
What's involved?
You have things likeidentifying the KPI, creating
the KPI, evaluating KPI,defining change and assessing
(14:32):
where you're at.
So let's just step back and goover those one more time To
identify you're setting up arelevant KPI for tracking the
company's performance.
Creating something means thatyou need to have a way of
measuring it, and whether it'sbig dashboards or scoreboards or
, in my case, energy output,volume of energy used versus the
(14:55):
energy conservation concepts,you have to do an evaluation.
That, by the way, is the thirdstep Evaluating how well these
business goals actually move thebusiness and whether they're a
relevant KPI.
That, by the way, is yourwindow on how to change
something if you don't thinkit's a properly applied KPI.
The fourth step is change.
(15:18):
Whether it's a strategy,whether it's a process, whether
it's an enhancement to equipment, whether it's even a change of
equipment in order to make itsomething different.
All those things are part ofhow the KPI can be enhanced or
improved upon.
And then there's an assessment.
Now you've changed your KPI andyou need to talk about how that
goal is altered and what isinvolved in order to show that
(15:41):
performance is actually beingaccomplished.
So there's obviously a lot moreto the discussion of KPIs.
The thing is, you can't playvictim.
You have to get involved inKPIs.
If they don't make sense,nobody's going to hold your hand
and explain it.
Some other secrets the annualassessment is not when you do
(16:05):
your measurement.
It's ongoing.
It's ongoing.
It's ongoing.
You have to be doing this.
In my world, we were doing itevery month as a minimum, and I
had people assembling responsesto KPIs weekly on energy
management.
So, depending upon how the goalis actually measured, they
(16:26):
actually had people checkingenergy daily and that's all.
To make yourself more proactivein order to make the changes so
that you're spending the leastamount of money, there's that
KPI magic dust You're reducingcosts and however, proficiency,
whatever the assets, the goals,the measurement equipment that
(16:48):
you need in order to accomplishthat end result, you better be
asking for it because it's aclear requirement If there are
too many KPIs.
It is a conversation thatshould be had at the beginning
so that it's more tangible forthe department to actually be
effective in order to make achange.
And we have to be carefulbetween an individual KPI and a
(17:12):
department KPI and a company KPI, because sometimes they drift
in and drift out, depending uponwhether you're managing that
process or not.
Some organizations actuallyhave people that are dedicated
to creating KPIs and I thinkthat's the other piece that I
haven't seen in my experience,but I know at other
organizations that does happen.
(17:33):
But in my world, if you're notauthoring it, you're just going
to play victim and the lastthing you want to do is sit in a
review and have the KPIs thatyou haven't been measuring and
everybody gets surprised as theoutput at the end of the year.
It's not a good KPI and itshouldn't be a gotcha game at
(17:57):
the end of the year either.
These are matrix based orperformance based goals that you
should be dealing with and ifyou're overwhelmed and it's too
difficult, they'd like to dothings called stretch KPIs.
So if you don't understand that, if you're in a yes or no KPI
(18:18):
or a stretch goal KPI, youbetter get that information on
the front end as quickly as youcan, because you can go through
a KPI evaluation and not meetany of the requirements and you
don't want to be shocked to hearthat you've actually done a
good job.
And you don't want to beshocked to hear that you've
(18:46):
actually done a good job becauseit's basically going to show
your hand that you've really notbeen involved in what the KPI
process was actually trying todo.
It helps focus employees sothat they control the end result
and they can influence the endresult.
That's the bottom line andyou're creating a matrix that
has impact and it has somemeaning.
Stay adaptable.
Regular assessments of KPIs canensure that the remaining
relevant and involved businessobjectives are being met.
(19:07):
A KPI should have a sense of astart at the beginning of the
year and show the change orprogress as it goes throughout
the year.
Using KPIs is just one toolthat helps in terms of
management.
It's not the only tool.
You have to make sure thatthere are soft skills and there
are performance-based,data-driven ideas.
(19:30):
Kpis are different type ofapplications showing that you're
doing a good job performingtheir task.
In my world I had people whowere retiring and they were
asking what was I doing to builda bench?
How are we preparing people toactually be advanced?
And it was a KPI.
(19:50):
That is a very forward thinkingkind of KPI and a great example
of something that we should bedoing in today's current KPI
environment.
Great.
Speaker 2 (20:02):
So let's talk about the what if?
What if the organization youwork for does not have any KPIs
for your particular businessapplication?
Should you just create someeasy ones to see if you could
get a pay increase?
You know, kind of sandbag alittle bit.
No, don't do that.
It's a bad idea to create easyKPIs simply to get a pay
increase.
Such a tactic is transparent tomanagement and can damage your
(20:25):
credibility.
Get a pay increase.
Such a tactic is transparent tomanagement and can damage your
credibility.
The better, more ethical and,ultimately, more effective
strategy is to proactivelycreate meaningful metrics that
demonstrate your real value tothe company.
So what are the risks ofsetting easy KPIs?
First and foremost, it damagesyour personal credibility.
Creating self-serving, easilyachieved goals will signal that
(20:49):
you are more focused on personalgain than the company's success
.
This erodes trust with yourmanager and leadership.
It also devalues your role as aleader.
By using simplistic metrics,you miss the opportunity to
highlight the complexity andstrategic importance of your
work.
So you're selling you and yourdepartment short.
Also, it can be seen asdisingenuous.
(21:10):
Your manager may perceive thisas an attempt to game the system
rather than a genuine effort toimprove performance, which
could harm future reviewoutcomes.
And it's probably an ethicalquestion here as well, if you're
willing to kind of quote gamethe system.
Speaker 1 (21:26):
Especially if you think you're putting one over on
them and it's transparent topeople who have been doing it
for a long time, you're probablynot going to fool them.
So, when you're thinking abouta better strategy and really,
how do you handle it beingproactive?
I'm going to try to break itdown quickly for you.
(21:46):
Understand the company goalsand if the KPI doesn't really
have anything to do with thebusiness challenge, it Two is
developing data-driven matrix.
I will tell you right now themore that you can spend time to
develop a database matrix thatyou can show how the data was
collected minimizesinterpretations, and that's a
(22:07):
KPI that is fair.
If you're not hitting the mark,it's an honest way of trying to
communicate the issues, but youbetter be prepared to explain
why you didn't hit those marks.
It's also the opportunity tosee whether it's something that
you need to redo because the KPIisn't effective in terms of
what you want as an end resultimproving the business.
(22:28):
That's an example of where youneed to take responsibility, and
probably the last part is themost important part.
Kpis is a strategic decision.
You're supposed to be talkingto your manager on whether the
KPIs actually make sense.
If they don't, you have to pickup the mantle and run into the
(22:50):
office and say we need to sitdown and talk about this because
the KPIs don't make sense.
And you know, greg, how much ofa surprise is it to jump into
the manager's office saying KPIsand not giving them at least a
heads up on what you're going tobe talking about.
The pros and the cons.
Speaker 2 (23:08):
Yeah, john, you absolutely need to give them a
little heads up and let them getprepared for responding to the
question about the KPIs.
You don't want to just catchthem off guard because nothing
good is going to come from that.
So if you're a professional,you want to be even a bigger
leader in the future.
Give them a little advancednotice.
(23:30):
Let them know what you'relooking for, give them some time
to put it together and thenmake sure that you're prepared
as well to make it a productiveconversation when you get to
talking about creating KPIs.
Speaker 1 (23:35):
Yeah, and one of the things that we've talked about
in the past is an SBAR reportsituation, background analysis,
recommendation One page, supersimple.
If you're going to sit down andtalk about a KPI, that doesn't
make sense.
Hopefully you don't have abunch of them to talk about, but
you would write one SBAR reportfor each KPI that you want to
(23:58):
talk about and try not to mixthem clearly because you want to
be able to make those changes.
To mix them clearly because youwant to be able to make those
changes, and you'll get more ofa clear kind of support or a
pushback if you are asking thosequestions on an SBAR report
before you sit down with themanager, so that they know what
(24:18):
you're going to talk about andthey know what you've discovered
.
And now you have a veryproductive meeting.
So hopefully this has been somehelp and, if you like what
you've heard, I've written abook called Building your
Leadership Toolbox and we talkabout tools like this and it's
(24:39):
available on Amazon and BarnesNoble and other sites.
The podcast is what you've beenlistening to.
Thank you so much.
It's also available on Apple,google and Spotify.
A lot of what we talk about isfrom Dr Durst and his MBR
program.
If you'd like to know moreabout Dr Durst, you can find out
on successgrowthacademycom, andif you'd like to contact us,
(25:01):
please send me a line.
That's wando75.jw at gmailcom.
And the music is brought to youby my grandson, so we want to
hear from you.
Drop me a line, tell me what'sgoing on, what you like and what
you would like to hear about.
It has always helped us tocreate content.
(25:21):
Thanks, greg.
This was fun.
Thanks, john, as always.
Next time, yeah.
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