The number of companies setting targets for their employees has risen by 17 per cent on last year, research finds.
Some 78 per cent of small businesses have set key performance indicator (KPI) targets for their staff, compared with 61 per cent in 2013, according to a study of more than 3,000 small businesses by law firm Peninsula.
Of those who set targets, 73 per cent say it has made a positive difference to their business.
A KPI is a unit that can be used to measure performance. As such, KPIs are advocated as a useful tool for company to assess their business’s performance and to evaluate overall company success.
Alan Price, group director for Peninsula says that any small business would be wise to implement targets for their employees no matter how small the business, whether it be five or 50 employees; KPIs will make a positive difference.
‘How successful they are will depend on how they are drafted and enforced,’ he adds. ‘The small firms that we speak to agree that having KPIs in place has helped their business grow. Up until a few years back the term KPI was unheard of [but] now it seems that many small businesses are implementing them and they seem to be making a difference.
‘It is important that you tailor KPIs to the needs of your organisation to ensure that they are both relevant and meaningful to your business,’ Price adds.
‘You also need to make sure that when you draft them they are achievable and ensure fairness especially when targeting part time workers compared to their full time counterparts.’
When drafting appropriate KPIs for your business, it is also important to ensure that these are SMART, says Price. This means that each KPI should be Specific, Measurable, Attainable, Realistic and Time-bound.
In addition to overall company performance, KPIs can also be broken down to measure individual and departmental success, or the success of a particular project or business activity.
Furthermore, effectively drafted KPIs can serve as a motivational tool to engage and develop employees, as well as be used as a benchmarking tool to evaluate performance from one business period to the next.
Price says, ‘In order to achieve the maximum benefit of using KPIs, it is imperative that they are effectively communicated to all employees. Employees should firstly be informed about what KPIs are and the benefits and meaning of their use to the business, as well as to the employee.
‘Employees should also be made aware of what KPIs they are going to be working towards and ultimately measured against. Further you will need to ensure that your employees understand what actions they need to take in order to achieve these KPIs, and also how they will be measured and assessed.’