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Using Key Performance Indicators to Increase Productivity and Profitability

In most businesses, the employees represent both an organization's biggest expense, and its most valuable asset. This means the company's productivity, and ultimately, its profitability depend on making sure all of its workers perform up to, if not exceed their full potential.

To survive and prosper in today's economic times, companies can no longer manage using financial measures alone. Businesses have to track non-financial measures such as speed of response and product quality; externally focused measures, such as customer satisfaction and brand preference; and forward looking measures, such as employee satisfaction, retention and succession planning.

Key Performance Indicators (KPIs) are a company's measurable goals, typically tied to an organization’s strategy, as revealed through performance management tools such as the Balanced Scorecard.

Most goals are achieved not through the efforts of a single person, but by multiple people in a variety of departments across an organization. Performance management experts agree that cascading and aligning goals across multiple owners creates a "shared accountability" that is vital to a company's success. The company then uses its Key Performance Indicators as the foundation to analyze and track performance and base key strategic decisions regarding staffing and resources.

Implementing the key performance indicators of a balanced scorecard typically includes four processes:

  • The company translates its corporate vision into measurable operational goals that are communicated to employees.
  • These goals are linked to individual performance goals which are assessed on an established periodic basis.
  • Internal processes are established to meet and / or exceed the strategic goals and customer expectations.
  • Finally, Key Performance Indicators are analyzed to evaluate and make recommendations to improve future company performance.

Case study: Lancaster Landmark Hotel Group

The solution

By cascading goals across Landmark Group's three London properties, everyone is now aligned together with full line of sight of each others' goals and objectives. The Group now also has the ability to review more competencies than ever before and has created a true performance-based culture across the group. There is now clear visibility of the company's Key Performance Indicators on how effectively strategy is being executed and the value it delivers back to the business.

Here are some of the benefits of using Key Performance Indicators through the Balanced Scorecard methodology as a measurement of a company's success:

  • Employees and managers see the overall corporate goal plan—and understand how their individual goals fit into the company's business objectives creating a situation in which employees feel energized and engaged in the success of the company.
  • Create shared employee responsibility—by cascading his or her goals with others in the company.
  • Managers more easily stay in touch with employees' progress—during every phase of goal completion, and offer immediate reinforcement or coaching to keep performance and deadlines on track.
  • Creating an open and communicative environment including quality feedback regarding goals and progress

Cascading your strategy throughout your company

Cascading your corporate goals throughout the organization lets you align your entire workforce to the overall strategy. This ensures that everyone is focused on your key business objectives. Translating high-level strategic goals into clear objectives for every business unit and every employee creates a clear line-of-sight - from top down and bottom up—so each individual understands how their day-to-day actions are contributing to overall company success.

This also allows employees to develop goals that link to the organization's objectives, driving understanding of strategy, generating commitment, and instilling personal accountability.

Conclusion

Modern cloud HCM software should provide all the functionality required to create and maintain the balanced scorecards for your organization—from the individual employee performance review to measuring the success of your corporate strategies and goals. Reporting modules within these tools can help you analyze all of your Key Performance Indicators more effectively to gain powerful insights about company performance.

About SAP SuccessFactors

SAP SuccessFactors Human Experience Management (HXM) Suite helps you completely reinvent the entire employee experience. You can shift from traditional HR transactions to engaging, end-to-end experiences, using intelligent technology to make each interaction simpler and more meaningful. And by linking employee feedback to operational data, you’ll understand what’s happening and why, so you can continuously deliver unexpectedly exceptional experiences that keep your business growing.

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