KPI refers to the key performance indicator assessment method. According to the management theme, performance management can be divided into two categories. One is incentive-based performance management, which focuses on stimulating employees’ work enthusiasm and is more suitable for growing companies. The other is control-based performance management, which focuses on standardizing employees’ work behavior and is more suitable for mature companies. But no matter which assessment method is adopted, its core should be conducive to improving the overall performance of the company.
At present, KPI is still an effective tool to constrain those inactive employees. For example, product operation itself is a typical goal-driven and result-oriented position. The most feared thing for people who do operations is confusion, busyness, and not knowing the meaning of the work they do. At this time, if you look back at what the KPI set by the team is, and think about what role your work plays in achieving this goal, you will not be confused. In fact, each of our products is also setting KPIs for users. We hope that users will complete what kind of behavior before they can get our feedback and rewards. If the goals are set reasonably, users, like employees, will definitely be happy to complete our expected behaviors and then get some material or spiritual rewards.
1. Three pitfalls of setting KPI
(1) When it comes to KPI, people simply look at the numbers. As we often hear, “data never lie.” But in fact, numbers are dead, people are alive. The results of different people analyzing the same data will be different. For example, if we say that an article on WeChat is very popular, we must mention the number of readers of “100,000+”. In order to achieve this goal, many content operators continue to write jokes or “chicken soup” titles. However, this method is not very helpful for the company’s brand or content value. For the same reason, many companies like to post jokes on Weibo. Why? Because jokes are the easiest to be forwarded and commented on, and KPIs are achieved in an instant, but how can this help the company?
(2) When setting KPIs, only looking at the short-term effect will damage the long-term development of the product. For example, the commercialization of Baidu Tieba, as a community product, there are many ways to commercialize it, which requires investment from all aspects. Therefore, in order to achieve KPI as soon as possible, selling Tieba has become the simplest way to realize it. After the Wei Zexi incident, people continued to criticize Baidu, causing the brand image that Baidu had invested billions of yuan to build every year to plummet.
(3) The setting of KPIs does not conform to the overall interests of the team, resulting in each team acting independently. For example, some companies have one of the criteria for evaluating designers: innovation. So the designers made a lot of interactive innovations on the product side and changed some of the default habits of products in the same industry. However, innovation has great risks. Once users do not accept it, it will cause potential loss. All risks must be borne by the product manager. Therefore, the product manager generally does not agree with these innovations, which leads to conflicts between the two parties.
2. How to avoid traps
(1) The person who sets the evaluation standards must be someone who truly understands the business. If the KPI set by the company is too alternative, then the person who sets the standards must not understand the business. For example, some bosses will say, “Let’s also create a WeChat account,” or “Let’s also do fan economy and get one million fans first.” We must know that a good evaluation standard must be based on business logic. Behind each digital indicator, there must be a complete logic to support it, and it cannot be made up on the spur of the moment.
(2) In the process of achieving KPI, there must be process supervision and control. For example, in user operation, it is easy to increase the number of users of a product, but it is difficult to increase the retention rate and active index behind it. If the retention rate is very low, or the quality of the users is too poor and does not match the target users of our product, then it will be useless even if the cost of acquiring users is low and the quantity is large.
(3) The KPIs set must make the division of labor between teams clear, but the interests are mutually tied. We must remember that a complete project is jointly promoted by three aspects: product, operation and technology. In this process, a clear division of labor can stimulate the enthusiasm of different employees. However, in order to prevent the interests of small teams from damaging the interests of the whole, KPIs must link various functions through a common goal. Otherwise, there will be conflicts between product managers and designers in the above case.
As long as the method is used correctly, KPI is still a good tool for measuring goals.
Case 10-16
Use KPI to build a high-efficiency and low-cost sales team
TalkLocal transforms online services into real-time conversations, and can close a business in a few minutes. This innovation has allowed them to change the old pattern of the housekeeping industry and emerge as a dark horse in a short period of time. The company divides the sales team into two types: builders and cultivators. Builders create process rules and solve problems; cultivators expand the application effect of services (products). Singh pointed out that the problem their company encountered before was that all the employees they recruited were “cultivators”, resulting in no “builders” to solve the company’s internal key strategies and resource problems. This employee level composition has brought them a lot of trouble. They made changes in four aspects, turning the original “cultivator” type sales team into a “builder” type sales team.
The first change is to cancel the basic salary and choose 100% commission. Their company laid off the original sales team, leaving only 5 people in the end. For these 5 people, the original basic salary system was cancelled, and the level of sales supervisors was adjusted to “executive level”. Singh explained that salary is the best means to motivate employees, and the salary space left by layoffs provides the possibility of salary increase. Another reason is that “a good cook cannot cook without rice”, and the same is true for a sales team. Without the right tools and technology, it is difficult to achieve results that exceed their labor costs. So the money saved was used to buy rice for the “good cooks” who stayed. Not only did they equip the sales staff with a series of marketing software and training materials, but they also provided them with space for research, training and trial and error.
The second change was to reduce the size of the team and slow down the recruitment of personnel. With the layoffs mentioned above and the cancellation of the basic salary system, they only recruited 5 new people in the following 6 months, just expanding the team size to 10 people. Why do you do this? From past experience, the effect of traditional collective training within the company is usually not good, and it cannot guarantee that most people understand and master the company’s new strategy well. It is easy to turn training into a routine. This directly leads to a decline in employee productivity, which in turn affects the level of the entire team. Therefore, it is necessary to slow down the recruitment speed so that everyone in the team can get enough training time, which will achieve twice the result with half the effort.
The third change is to establish a training system of mentor-apprentice relationship. The company will select a senior employee to establish a mentor-apprentice relationship for the new employees, which can avoid the shortcomings of traditional training mentioned above. In the past, new employees may learn some bad habits from “old hands” when they first start working, which is not only not good for the future development of new employees, but also confuses the company’s senior executives, because when problems arise, it is difficult for senior executives to analyze the exact reasons for this situation. Now, through this mentor-apprentice system, new employees are trained one-on-one at work, and their time to get started is shortened by a full week.
The fourth change is to try to choose a cooperative working method. For a startup company, the team size is usually small, and each salesperson can participate in substantive strategic meetings. The advantage of this is that it can make new employees feel that they are participants in decision-making rather than just executors, and their attitude towards the company’s leaders has become a relationship of collaborators, which will greatly improve their enthusiasm at work. More importantly, when the company’s decision-making ideas are thought out by employees themselves, it also shows that they have thought more deeply about the company’s development. TalkLocal adopted this approach. With their sales team size only one-third of the past, their average sales performance has reached more than half of the company’s peak sales, and the performance is still rising steadily. The efficiency of the entire company has been greatly improved compared to before. At the same time, they saved $92 on each salesperson – this money can also be invested in other projects, or in-depth cooperation with customers who can provide added value.