Key Performance Indicators, or KPIs, are a pretty standard measurement in most companies. Employees are usually assigned individual KPIs they need to meet each week or month and their performance reviews are often tied to those numbers. At first glance, this seems perfectly acceptable. Why shouldn’t a team member’s performance be measured?

The problem is that most KPIs don’t actually measure a worker’s progress and end up forcing them to focus on hitting arbitrary numbers. They’re actually more useful for teams than individual employees. 

For instance, fleet maintenance teams have KPIs to meet, but they’re created with the intent to ensure they meet the specific criteria that matters. It’s much easier to measure the performance of a team through KPIs.

What KPIs are supposed to be for

KPIs are supposed to measure performance, but they’ve been assigned incorrectly and somewhat arbitrarily in the last decade to the point where employees are sacrificing productivity just to meet their numbers. When those numbers don’t reflect actual progress, that’s when there’s a problem.

Upper management sometimes has no way to know if an employee is doing their job, so they jump into assigning KPIs with the belief that hitting specific numbers each week or month can tell them how an employee is doing. The problem is that most KPIs are arbitrary, and sometimes don’t even have a connection to a worker’s specific tasks. 

In some cases, KPIs are assigned to employees who have absolutely no control over the factors that go into generating their KPIs. This makes hitting those numbers a gamble, and as a result, some employees get reprimanded and even fired for not meeting their KPIs.

KPIs aren’t bad when properly used

While using arbitrary KPIs to measure performance will backfire, a well thought out KPI assigned to the right person can be beneficial. It can give an employee a meaningful goal to reach and help them adjust their strategy to better hit their target numbers.

KPIs shouldn’t be created in a silo

Before assigning a KPI to anyone, the person creating the KPIs needs to sit down with the employees in question and make sure they’re setting the right goals. This is hard to do without a direct conversation. Skipping this step is what leads to KPIs the employees have no control over.

For example, a digital marketing team member might be assigned the KPI to hit 100 new email signups each month, but if they can’t change the sales pages, squeeze pages, email signup forms, or lead magnets, they can’t optimize anything for conversions. At best, all they’ll be able to do is increase traffic and hope it converts. In this case, it’s not fair to hold someone responsible for lead generation numbers when they can’t optimize the content that converts.

Employee KPIs can negatively impact performance

You’d think that measuring performance would always be a good thing, but that’s not true. Sometimes measurements can be detrimental to performance and crush creativity. Worst-case scenario, employees with meaningless KPIs will end up wasting their time finding ways to reach the numbers just so they don’t get a bad performance review, all at the expense of actually making progress with their daily tasks.

The controversial opinion is that KPIs don’t measure how good someone is at their job, nor do they measure how successful someone is at achieving target goals. For example, when a job requires creativity or deep thought, rewarding people for getting high numbers and penalizing people for getting low numbers doesn’t work. Psychological tests have shown that performance-based incentives for creative work cause employees to underperform. KPIs and innovation just don’t mix.

KPIs can kill collaboration

Rewarding employees for hitting their personal KPIs can make them become hyper focused on themselves at the expense of the team. When employees are only rewarded for hitting numbers, the people who go out of their way to help others, show empathy, and deliver amazing customer service get left behind. Over time, this can kill your company culture and make people feel like the only thing that matters are those numbers.

When teams only focus on hitting their KPIs because that’s all that matters, it makes work days robotic and creates a sense of monotony. This can cause creativity to plummet fast.

If you use KPIs, choose them wisely

While the disadvantages of KPIs are pretty clear, that doesn’t mean you have to avoid them altogether. It just means you need to be careful about choosing the right KPIs for the right people. And sometimes that means not assigning KPIs at all.

Your business will thrive when your team members are free to be creative and serve their team without being constrained by arbitrary numbers. If you’re going to use KPIs, be intentional or skip them completely to avoid the negative consequences.