Why human performance should be a key indicator in business
Behind every successful business is an abundance of spreadsheets, graphs and wall displays using data to showcase how they’ve grown to that level — and where the business is forecasted to go. Most directors, managers and business school teacher’s call these figures ‘key performance indicators’ (or KPIs, as the lingo goes).
Traditionally, many of these KPIs are centered around the finances of the business. The fundamental aim of every business is to generate money, of course, so it would make sense that this is a way it’s tracked.
However, I’d like to argue another point — one, admittedly, I’ve argued quite a lot lately: it’s the people who make your business grow. Therefore, if you’re measuring the success of your business on data then that data should represent how your people are performing.
In the HR world, they call this ‘human performance’ — so let’s go with that idea for the purpose of this piece.
I’ve argued a fair few times in my blog posts that making your staff happy and content in their job should result in a healthy business revenue. If you build a safe, understanding business culture then you’ll build a profitable future because you’ve created a world where your staff can grow as people and employees (inside and outside of the organisation).
Every business leader can agree that this is a great theory, but if you’ve got investors and board members to answer to then you need some statistics to refer to when questioned about your spend in employee wellbeing.
There’s an argument out there that human performance cannot be measured — but I wholeheartedly disagree. There are plenty of pieces of data out there that you can refer to in order to argue a valid point: people are integral to your business.
For the sceptics and fearful CEOs amongst us, I’d like to offer some practical advice on how human performance can be measured — and why you should be focusing on these pieces of data alongside how much money your business is making.
After all, the higher your human performance data is, the higher your profit will inevitably be — humans are in control of the latter statistic, after all.
Let’s look at the basics to start with: how much is the quality, capacity and volume of work really affecting the revenue of your business?
The KPI’s to think about are as follows:
● Sales conversion rates: How many sales have been made from the individual in comparison to the number of enquiries they’ve received?
● Salary rate/sales turnover: How much are they costing to have on your team?
● Sales turnover per employee: What’s the net income divided by employees?
● Employee error rate: This is a key statistic — humans make mistakes, after all. To calculate the error rate, you simply need to understand the number of errors per time spent. It’s a fairly commonly known fact that multi-tasking increases error rate by 50%, as reported by HR review.
Human capability (and health, for that matter)
Now you’ve got the basics — let’s break it down a little more. Humans are humans: every life is a rollercoaster and even the most dedicated employees are met with difficulties that can affect their role.
However, no matter how compassionate you are as a leader you still need to keep an eye on the business results. To be more realistic about the capacity of your team, these are the KPIs you should follow:
● Percentage of employees who are competent in their roles: This may seem like a tough statistic to swallow, but you do always have to consider the competency of people in their roles. As humans ourselves, business leaders can find it very difficult to differentiate between someone who’s right for the company and right for their role.
● Average training time: How much time does it take for your employee to become competent in their role? Think about your line managers: how long does it take for them to train a new recruit?
● Health & wellbeing costs per month: People who feel supported, and are part of a caring company culture are less likely to fall sick or coincide sick days as part of their holiday entitlement. Mental wellbeing also has a direct effect on physical health so people who are cared for and feel supported are less sick. This saves companies thousands and a CEO or business leader with a 360 degree view will see both this and the fiscal benefit to their business.
I’ve spoken multiple times about how vital company culture is. A study by Gallup (2017) found that close friendships at work boost employee satisfaction by 50% and people who work with someone who they describe as a best friend are 7 times more likely to be fully engaged.
Business psychology studies aside, I can certainly address that measuring the investment in company culture can be seen as a challenge. However, I strongly propose that the following KPIs are considered when you’re evaluating your next social budget.
● Total hours lost due to absenteeism: Let’s face it: if your employees aren’t at work, their work isn’t getting done to full capacity and revenue isn’t reaching its full potential. Sometimes employees are off for personal reasons out of a business’s control, but if the total hours lost due to employee absenteeism are high, then your company culture should be addressed.
● Number of employees who understand the vision and believe they have the right support to make it happen: Of all the KPIs, this is the one to be the most wary of because it relies on a company survey that employees may be nervous to answer honestly. However, it’s important to know how many of your employees truly understand the company vision in order to measure whether or not their performance is taking your company in the right direction.
● Number of employees receiving satisfactory appraisals: This data is far more trustworthy and a key piece of information to look at. It’s a simple idea — the more employees your managers are happier with, the higher chance your business has for succeeding.
● The Average life cycle of employees: The longer your employees stay working in your business, the stronger your business will be. Why? The longer your employees work for your business, the more they know it and the easier it will be for them to run it to their highest potential.Mark Cushway is the CEO of the Inspired Group of companies and is passionate about employee welfare, engagement and motivation. Connect with Mark on Twitter and LinkedIn. This blog post is also available as a podcast on iTunes and Soundcloud.