Employee Motivation and Key Performance Indicators

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Table of Contents

Definition of KPIs
Importance of Motivation
KPIs as Motivators
Possible Negative Effects of KPIs
Conclusion
Reference List

In the contemporary world, business environments have become more people-centred. The authoritarian leadership that used to dominate corporate relationships in the past has been replaced by the collaborative and transformational relationships orientated to the empowerment of the employees. The motivation of the workers is now recognised as the key factor contributing to the performance improvement. Psychology differentiates between many theories of motivation among them there are Maslow’s hierarchy of needs, ERG by Alderfer, and McClelland’s theory of needs, to name a few. That way, there are a variety of approaches to motivation and performance improvement within organisations. This paper explores how Key Performance Indicators (or KPIs) can be used as the facilitators of positive motivators and such ethical values as integrity and equity.

Definition of KPIs

KPIs represent the factors of financial and non-financial character that are used by the organisations and managers to track progress and evaluate the level of success of their business (Velimirović, Velimirović, & Stanković, 2011). As a result, KPIs are a unique and powerful tool at the fingertips of the employers willing to maximise the workers’ enthusiasm through motivation. Wisely formulated KPIs provide guidance for the employees directing the business towards the most important goals and achievements. In order for the employers to be successful at the establishment of their company’s KPIs, they are to be familiar with the factors that energise the performance of the employees.

Theories of motivation provide a series of interesting views of this issue that is now a global concern of large and small organisations. The contemporary financial instability in the world encourages the businesses to take care of their own stability and responding to the rising challenges in a flexible manner. For instance, such contemporary global issues as skills shortage, the integration of the Millennials in the labour force, democratisation of labour, and occasional financial crises stimulate the companies to focus on the attraction of the best human capital and the retention of the existing specialists.

Importance of Motivation

Today, human capital is viewed as one of the most valuable competitive advantages for a business (Gabčanová, 2012). In the world where the employees are aware of their rights and freedoms, and where the best professionals know their value and have high demands as to their workplaces, the employers are responsible for the creation of pleasurable working conditions to attract and retain human resources.

While the old-fashioned views upon motivation were based on the perception that the strongest moving forces were fear and monetary rewards, the modern employers have learnt new lessons from the theories of motivation. For instance, needs theories by Maslow, McClelland, and Alderfer agree that affiliation, relatedness, and personal growth are some of the most powerful motivators for the human beings (Van Tiem, Moseley, & Dessinger, 2012).

In other words, negative emotions based on the satisfaction of the basic needs are not as successful as the strategies aiming at satisfaction of higher needs such as self-actualisation or affiliation. For example, using fear of getting fired and becoming financially insecure as a performance booster, an employer will get positive results as a short-term outcome, whereas the later consequences will be job dissatisfaction, desire for justice, possible protest, and, eventually, high rates of turnover and instability in the company.

KPIs as Motivators

The main objectives of KPIs are to sort the performance data for the benchmarking, provide basis for the comparison of the current performances and those of the past, allow building forecasts for the future results, plan actions when the improvement is needed, define the targets for the performers (Bris, Soares, & Martorell, 2009). In other words, the motivational role of the key performance indicators is to outline the set of clear goals for the employees directing them towards particular results and organising their efforts in the most efficient way. However, to serve as motivators, KPIs need to be used in combination with a system of incentives and rewards for the employees who meet the standards.

The ethical issues here concern the equity among the performers. The constant success of the high performers is likely to discourage those incapable to match the set standards. That is why it is important that the system of KPIs and the rewards are available to every worker. Otherwise, the KPIs would achieve the opposite result among the low performing groups of workers as they would begin to feel unappreciated and treated unfairly. Some motivational theories connect this phenomenon to the performers’ desire to re-establish the equity and gain the benefits they could not reach using alternative ways such as cheating or workplace theft.

Possible Negative Effects of KPIs

Even though key performance indicators are seen as a useful tool and are initially designed to generate positive effects and benefit the work process, if formulated and administered incorrectly, they are able to damage the organisational performance.

Hastings (2009) notes that key performance indicators are to be designed very carefully so that they do not impact the behaviour of the employees in any other way apart from “motivating genuine performance improvements” (p. 320). Depending on the effect they make on particular persons, the KPIs may serve as both motivators and de-motivators. For example, then two departments with different functions cooperate, KPIs may affect both of them and cause clashes.

Hastings (2009) uses an example of operations and maintenance departments, where the costs for car tires are taken from the budget of maintenance, the operations are found to be less likely to be careful with the equipment. That way, the KPIs that focus on efficiency but fail to provide specific goals and tasks to the employees, they may cause the increase of efficiency that is enhanced at the cost of quality. In other words, then only the number of accomplished tasks is rewarded, the employees would be motivated to work faster and disregard their integrity to the quality requirements.

Conclusion

To sum up, KPIs play a significant role in the performance improvement through the employee motivation. However, only carefully weighed performance indicators generate benefits. They need to answer the needs of the workers and be correlated with the incentive systems targeting the right goals.

Reference List

Briš, R., Soares, C., & Martorell, S. (2009). Reliability, Risk, and Safety, Three Volume Set. Hoboken, NJ: CRC Press. Web.

Gabčanová, I. (2012). Human Resources Key Performance Indicators. Journal of Competitiveness, 4(1), 117-128. Web.

Hastings, N. A. J. (2010). Physical asset management. London, UK: Springer. Web.

Van Tiem, D., Moseley, J., Dessinger, J., Van Tiem, D., & Van Tiem, D. (2012). Fundamentals of performance improvement: Optimizing Results through People, Process, and Organizations. San Francisco, CA: Wiley. Web.

Velimirović, D., Velimirović, M., & Stanković, R. (2011). Role and importance of key performance indicators measurement. Serbian Journal of Management, 6(1), 63 – 72. Web.

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