Are KPAs still relevant? | Fin24
 
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Are KPAs still relevant?

Jun 07 2019 14:54
Amanda Visser

Imagine a golf course with no holes in it, and players aimlessly hitting the ball anywhere and everywhere. 

That is what a business without key performance areas (KPAs) or key performance indicators (KPIs) would be like. 

KPIs are performance metrics to ascertain how effectively the firm is performing. 

KPAs indicate the main responsibility areas of an employee. 

It guides them to do what is expected of them in return for earning a salary, or to be in line for bonuses or shares.

The ‘holes’ on the golf course are important as you “have to aim for them, and you have to hit it after three or four putts”, says Mark Bussin, chair of 21st Century, a specialist reward consultancy, on the need for KPAs. 

“The feedback is hearing the ball drop.”

The purpose

The traditional thinking was that the human resource (HR) department had to drive the performance management process. 

But the modern trend is that the CEO has to drive it as part of their business strategy. 

HR teams are merely the advisers and the custodians of the process.

KPAs and a well-developed performance management process also help companies to comply with the Labour Relations Act, says Bussin.

“If you want to fire someone for not doing his job, you must have proof that he did not perform to expectation.” 

That is achieved by having a clear job description and KPAs and measuring whether the employee is meeting their targets. 

Without this documentation it becomes almost impossible to manage the employment relationship. When all is well, and the employee is a star performer, you do not need it as much.

“However, if the employee is having a bad day, or bad month or even a bad year, then you need to have some documentation to show where the employee is not hitting the spot,” says Bussin. 

Without managing and measuring performance, the employee will have the Commission for Conciliation, Mediation and Arbitration (CCMA) or the labour court to protect them against unfair labour practices.

Getting it wrong

Companies get it wrong by setting unrealistic and unreasonable targets, by not clearly communicating the company’s objectives, and by not negotiating reasonable and realistic goals with employees, says Bussin.

It becomes a top-down approach where the targets are set without having a conversation. When those targets are unreasonable, people become completely demotivated and demoralised and they start looking for another job. 

Managers have to sit down with employees and have a conversation. 

“If I had a magic wand, I would change the word performance management to performance conversation. That is what is supposed to be happening, but everybody is busy. The approach is top-down, and people just have to get on with the job,” he says. 

Best practice is to allow employees to take the time to connect and engage with their KPAs. 

Employees should have time to assess their performance areas, how they may have changed and whether the targets are realistic. Managers, on the other hand, must have regular conversations with employees on how they are measuring their output. 

Bussin says it is important to simplify performance contracts. 

All the KPAs can be covered in one page. 

“It must be as simple as saying I want you to stop doing this, start doing that and continue doing that.” 

With companies becoming increasingly agile and flexible, performance management systems also help to determine whether remote workers, or workers with flexible hours, are actually working. 

“This agile workplace increases the need for good performance management systems in order to achieve the organisation’s objectives. It is necessary to set targets for the employees.”

The process

KPAs help to communicate each employee’s contribution to the organisation’s mission, vision and strategy, says Mark Bussin, chair of 21st Century, a specialist reward consultancy.

They also describe the essential areas of a business that require excellent performance in order for that business to obtain favourable results. 

“The sum total of everybody’s KPAs must ensure that you hit the business KPAs (business strategy),” says Bussin.

An effective performance management policy is key

- There has to be a clear performance policy that sets out the rules of the game. 

Without that you will have endless complex conversations that repeat themselves.

- Documentation used to track performance has to be simple and quick.

- Managers have to be well-trained on how to have performance conversations. 

Measuring differently for teams who work differently

Innovation is key to an agile company. 

But with innovation comes the need to adapt how success is measured. 

Where teams are working on innovation and keeping themselves busy with the right kinds of activities, it is important for management teams to trust that the results will follow. 

This is according to Art Markman, professor of psychology and marketing from the University of Texas in an article published in American weekly magazine Inc.

Three key performance indicators for innovation teams could include: What is the group learning? 

Innovation is key to an agile company. 

But with innovation comes the need to adapt how success is measured. 

Where teams are working on innovation and keeping themselves busy with the right kinds of activities, it is important for management teams to trust that the results will follow. 

This is according to Art Markman, professor of psychology and marketing from the University of Texas in an article published in American weekly magazine Inc.

Three key performance indicators for innovation teams could include:

- What is the group learning? 

If a team is working on something that has not been done before, the team will be acquiring new knowledge. 

Such teams should be assessed on the basis of the new knowledge they are acquiring. 

How many articles from scientific journals have they read? How many books have they explored?

- How many ideas are being considered? 

Groups that come up with the best ideas tend to come up with the most ideas. 

When evaluating the ideas a team has developed, the diversity of these ideas should be considered when measuring success.

- Evaluating the market
Human memory tends to gravitate back towards tried-and-tested solutions to problems. 

A key source of the most important constraints that impact innovation comes from the market. 

What is the maximum price that people or firms are willing to pay for a particular solution? 

Are there types of solutions that people will not be comfortable with? 

What is the time frame for launching an innovation? 

This article originally appeared in the 6 June edition of finweek. Buy and download the magazine here or subscribe to our newsletter here.


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