Common Sense KPI’s Gone Wrong

I love dashboards.  I have a goals list on my phone tracking how many miles I’m supposed to run or ride on my bike.  I have a trending graph on the device that tells my how much I weigh.  The only reason I have not bought one of those fitness wristbands yet is because I just can’t stand things on my wrist!  I was just on the company call, and we do the company performance dashboard, we stack ranked the all time leaders for ideation at the company, and all sorts of other visual and gamified graphics.  As employees, we should be managing our goals and goal progress, and some systems now have cool mobile components that can visually show where we are with each performance goal.  It’s great to be able to track where we are at any given time in almost any area of our lives.

Sometimes our KPI’s go desperately wrong, even though they seem to make sense.  My current personal goal is to get back to 10% body fat.  For those of you who don’t know me, let’s just say I’m already one “skinny ass dude.”  The problem is that less fat for a person who is generally athletic and out of doors as often as possible sounds like a good thing.  The question is, is it the right thing?  We actually face the same problem in our HCM KPI’s.  Here are a few examples.

Employee Referral %:  

  • Employee’s who are referred to us by other employees are our best people.  Right?  Almost all of us would agree that this is true as these employees will have higher levels of engagement, are pre-screened as people we’d want to work with, are capable and smart.  The referrer has a stake in the person’s success, but their credibility is also on the line so they probably won’t be referring crappy people.
  • Often, we’ll see that companies want to achieve as high a referral % as possible.  This allows the company to get more great people, but also reduce recruiting costs.  The problem is that there’s also a tendency to refer people who are similar to us.  This is a problem on a couple of fronts.  First of all, there is an ideation and innovation problem.  If you recruit people who are similar to you, who have similar experiences, have worked in the same places, you are not getting your company’s due in diverse thinking.  Second, people like us are not demographically diverse all of the time.  if you have a lot of “white dudes” and you want a 100% referral rate, you’re still going to be a bunch of “white dudes” in 5 years.

Employee Turnover %:

  • This one is fun.  Some organizations are SO proud of the low turnover that they have.  I’ll walk into a new project and within day’s I’m inundated with how they have achieved 5% turnover.  I mean, having great employee engagement so much so that nobody ever wants to leave is a great thing, right?  We see targets of 8% and lower all the time.
  • Depending on which philosophy to subscribe to, there is such a thing as “desirable turnover.”  Those are the Jack Welch bottom 10%, or in your forced bell curve performance ratings the bottom 5-15%.  Let’s just say that there are 10% of people in your organization at any time that SHOULD leave, and you should be encouraging to leave.  So if your desirable turnover is up to 10%, and your target is less than 10%, something is pretty much wrong.  Right?
  • The key is to figure out how to shift the conversation to unwanted turnover rate instead of total turnover rate.  A very high performing organization could have a total turnover rate at 12%, but if their unwanted turnover is only 2%, I’d say they are doing fantastically.

We all want high referral rates, and we also want low turnover rates.  These are great KPI’s, but we take too much for granted and at face value.  Going to extremes just because there’s a number to hit impacts our organizations in a pretty negative way, and in HR, it usually means that we have some of the wrong people working for us.