When business owners hear the term “Key Performance Indicator”, they often think of hard numbers: sales, gross profit, conversion rates, production volumes and delivery times. These measures are valuable because they are objective, easy to compare and difficult to dispute.
But not everything that matters can be measured precisely.
Some of the most important aspects of performance—leadership, teamwork, initiative, communication, judgement and customer care—cannot always be reduced to a neat number. That does not mean they should be ignored. It means we need to become comfortable using subjective KPIs.
A subjective KPI is based partly on informed judgement rather than purely on numerical data. For example, a manager might assess an employee’s willingness to help colleagues, the quality of their communication or their ability to remain calm when problems arise. A business owner might rate the strength of relationships with major customers or the effectiveness of weekly management meetings.
These assessments will never be perfectly objective. However, that does not make them useless.
In fact, pretending that only measurable things matter can create serious problems. A salesperson may achieve an excellent sales result while making unrealistic promises that other employees must fulfil. A production manager may meet output targets while creating an unhappy and unsafe workplace. A customer service team may close support tickets quickly without actually solving customers’ problems.
The numbers look good, but the business may be getting worse.
The answer is not to abandon objective KPIs. It is to balance them with carefully chosen subjective measures. A manager could be assessed on financial performance as well as staff engagement, cooperation with other departments and the quality of their decision-making. A salesperson could be measured on revenue, customer retention and the accuracy of the expectations they set.
Subjective KPIs work best when the standard is clearly described. “Has a good attitude” is too vague. “Responds constructively to feedback, offers assistance to colleagues and raises problems with possible solutions” is much more useful. The more clearly the expected behaviour is defined, the fairer and more consistent the assessment becomes.
It also helps to use a simple rating scale and require examples. If someone receives a score of three out of five for teamwork, the manager should be able to explain why and identify what would be required to achieve a four. This turns a personal opinion into a useful performance conversation.
Employees should also be invited to assess themselves. Differences between an employee’s rating and their manager’s rating can reveal misunderstandings about expectations and create a valuable discussion.
Of course, subjective KPIs can be affected by bias. Managers need to be aware of favouritism, personality differences and recent events influencing their judgement. Regular reviews, written examples and input from more than one person can reduce these risks.
Good management requires judgement. Avoiding subjective KPIs does not remove subjectivity from the workplace; it merely leaves it hidden and unmanaged.
Measure what you can, but do not ignore what you cannot measure precisely. Sometimes the things that are hardest to count are the things that matter most.
Photo by Rostislav Artov on Unsplash