KPI's are culture killers

Key Performance Indicators (KPIs) are the lazy leader’s crutch that leads to disengagement, a breakdown of positive culture and a stifling of organisational growth. Key Behaviour Actions (KBAs) however, focus team members on executing per organisational values, supported by engaged leaders promoting a continuous improvement culture.

KPIs are generally characterised as specific, measurable, achievable, realistic and time-bound targets that employees are required to meet to unlock bonuses, promotions or sometimes just to remain employed. In some industries, KPIs have been the key driver to measure, reward or punish employee performance for decades.

Why are KPIs so bad?

KPIs focus on outcomes only, much like a profit and loss statement. This focus overlooks the fact that, in most situations, employees do not have control over the outcomes they are being measured against. Most outcomes result from many entwined internal and external factors of which an employee’s action is just one. Further, by focussing an employee on outcomes instils in them that their value to the business rests on said results, as opposed to their behaviour and other valuable qualities they bring to the team.

We have all seen the ‘high performing’ arrogant and bullish sales guy be excused for his behaviour and celebrated for his ‘success’. This celebration occurs even though both the buyer and seller are unlikely to ever recommend this business to anybody or use them again themselves. Further, this sales guy is likely the root cause of office tension, the latest bullying and harassment claim or the last three resignations!   

Another example sees an organisation that employs professional consultants to provide expert advice to clients. Each consultant has a KPI (or quota) to achieve 25 billable hours per week. If they reach 30 hours, they get a bonus, however if they miss their target in any one week, the pressure builds, and the spotlight is turned on them. There will likely be a myriad of reasons why they didn’t achieve their target, but the conversation is focused on the result, not excuses… sound familiar?

These all-too-common KPI model is often the root cause behind organisational mediocrity, poor culture, and employee disengagement.

KPIs encourage mediocrity

In workplaces where KPIs are a key driver, most employees' primary goal is to keep their job. The dread of disappointing their manager, coupled with the desire to feel valued and employed, means that the consultants will likely push excess billable hours, i.e. hours over 25 per week, into the following period to remove the pressure. Or worse, the consultants will manufacture billable hours, to the detriment of their clients, to achieve their targets. These behaviours serve little purpose other than to create a false measure of performance and mediocrity!

Moreover, from a business strategy perspective, the leaders of the organisation have no way of determining how successful their business plan is. Just because every employee reaches their goal every week, does not mean that the business is operating optimally or ethically.

KPIs encourage unethical / non-values-based behaviours

The need to meet a KPI that an employee can only partially control has the potential of creating a ‘results at any cost’ culture, essentially placing the employee in a position where they may need to act unethically or insincerely just to meet targets. Whilst these ‘positive’ results lead to short-term financial success, in the medium to long term, this conduct will jeopardise survivability by increasing compliance risk, creating toxic cultural norms and stifle innovation.

The 2018 Royal Commission into Australian banking shockingly uncovered many unethical, dishonest and even illegal actions being carried out by ‘incentivised’ bank employees. The Commissioner stated “Much if not all of the conduct identified ….. can be traced to entities preferring pursuit of profit to pursuit of any other purpose…. there had been occasions when profit has been allowed to trump compliance with the law, and many more occasions where profit trumped doing the right thing by customers”.

The Royal Commission uncovered the unsettling truth that this behaviour was not unique to one or two banks, but it was common practice throughout the industry. This is a clear demonstration of the power that KPIs wields, i.e. incentivising thousands of financial advisors and bankers throughout Australia to behave unethically towards their fellow Australians for years in blind obedience of KPI achievement.

KPIs kill quality leadership

Lazy leaders love KPIs because it’s easier to be an appraiser instead of a leader, where pats on the back or critical evaluations are based solely on the outcome achieved with little adherence to anything else. This is akin to the producer of a motion picture, placing the success or failure of the movie on the shoulders of the lead actor with little regard for the multitude of other factors at play.

Good leaders provide coaching, and mentorship (in real time) directly focussed on behaviours and actions, rather than on the outcomes achieved. Working together to improve behaviours and actions, in line with company values and procedures, will result in improved outcomes, which will be sustainable over the long term. However, a KPI backed management structure restricts and constrains good leaders from acting as such.

Good leaders instinctively coach, support, and recognise personnel behaviours, per the determined values of the organisation. However, a KPI lead workplace model, where targets are often not achieved, will, by its very nature compel leaders into a position that requires immediate focus on remediating the result without due regard to how the employee acted. Not only is this a stifling and demotivating culture to promote, but it will also lead to disengagement throughout the team.

What should we replace KPIs with?

If a TLA (three-letter acronym) is required, then the recommended replacement for KPIs is KBAs or Key Behaviour Actions. Adopting KBAs enables a shift of focus away from outcomes and onto the one thing that individuals can control: their actions and behaviours. A focus on KBAs over KPIs empowers individuals to be accountable for their actions and behaviours whilst enabling leaders to coach, support, and recognise efforts transparently and constructively. 

It is well-documented that employee dissatisfaction and disengagement result from being held accountable for outcomes outside of their control, all the while being rewarded and/or punished with a carrot versus stick methodology. Ultimate employee performance and engagement result when people are motivated to improve what they can control (their own actions and behaviours) within a framework that promotes transparency, regular communication, and continuous improvement.

To illustrate this point, the graph below compares some of the many factors that are involved in achieving an outcome (in this case we are referring to billable hours) with the number of factors that can be controlled by the individual being measured.

The elephant in the room – what about our P&L?

Replacing KPIs with KBAs does not mean that results do not matter, nor that outcomes should not be measured. Results are an obvious tracking tool that must be regularly monitored to gauge the health and sustainment of every business. The shift in mindset that is required is for the senior leadership of the organisation to take responsibility and accountability for the results of the business.

Senior leadership is responsible for developing and implementing the business plan that presumably considers every internal and external factor. One factor is to define the expected actions and behaviours of the team members executing their role in the plan – which is typically communicated via policies, procedures and values.  These are the KBAs. Leaders can coach, support and recognise individual KBAs. If the team members are all executing correctly per the KBAs and the team is failing to meet defined results, then clearly the plan needs refinement.

If this situation eventuates, proactive leaders will use a combination of employee collaboration and expert consultation to review KBAs to drive a more optimal result or re-align expectations based on experience. Over time, as the KBAs are continuously improved, the organisation will reach optimisation levels that were never achievable under the KPI program.

How do I introduce KBAs into my team?

The first step is to ensure that the key behavioural actions are clearly defined and communicated to everybody. As previously stated, this is usually achieved by clear, concise and transparent policies and procedures linked to organisational values.

Once the KBAs are known and communicated to all team members, leaders need to engage regularly in conversation with individuals to coach, support and recognise their KBAs. The important and differing attribute of a KBA vs a KPI is that they are not a time-bound, set target. They are constantly evolving and moulding via quality leadership in the desired direction. The focus on behaviour and action improvement over time becomes habitual, employees are engaged and motivated and the P&L will reflect this.

To find out how deBa can be used to implement KBA’s into your workplace, contact us today.