What are KPI’s

Key Performance Indicators (KPI’s) are a quantifiable measurement that reflect the critical success factors of a business and provide a metric that reflects how well employees, and the business overall, are achieving their stated goals and objectives.

Why have KPI’s?

KPI’s provide a valuable means for businesses to monitor and track actual performance or progress towards a stated business goal or strategic objective. KPI’s can be developed to capture financial or non-financial measures, but either way they need to have a direct and measurable impact on the business goals.

KPI’s (which can also be referred to as Key Success Indicators), help an organisation:

·        define and measure progress toward organisational goals,

·        provide a valuable tool for communicating the business strategy and turning this strategy into action.

·        align each employees’ roles and activities with the overall business strategy to ensure that the tasks being performed by each employee are directly supporting the overall goals the business. This further helps employees to understand how their role fits into the bigger picture.

·        provide a quick and concise way of reviewing actual performance or progress towards specific goals or objectives, and

·        assist management through providing reliable and visible measures that support prompt decision making.

KPI’s provide a means for supporting the communication of the business strategy to each employee and helps secure their commitment towards implementation. The result of implementing KPI’s is that employees will be doing what they should be doing and establish metrics for measuring performance that are directly tied into the success of the business.

It is essential that all employees, and their respective business units, are working towards the achievement of core strategic goals and objectives.  The ability for your employees to do this effectively depends largely on how well they understand the responsibilities and tasks that are expected from them in their position.

Through developing clear measurable goals that are directly linked to the specific targets required to be met from each position, KPI’s set out the performance standards that each employee is expected to achieve. KPI’s further enable an employee’s position description to be used as an assessment tool to measure employee performance against the stated position requirements as part of the annualised performance review process.

Who should prepare the KPI’s for a position?

For new positions, KPI’s would normally be prepared by the supervisor and be approved by the relevant manager (one level above the direct manager) in line with the business goals and strategy.

For existing roles, the position’s KPI’s should be reviewed annually (or earlier if circumstances determine that a change is warranted). Where there is an incumbent in the position, they should contribute to, and be consulted with, during the development of the KPI’s to ensure that they remain relevant and will continue to motivate and challenge employees to meet their targets.

Where KPI’s are imposed on employees without genuine consultation, this may result in employee compliance, but are likely to reduce an employee’s motivation to strive to meet the set goals. Furthermore, engaging an employee in the process of reviewing and developing their KPI’s will work to ensure that they know what they need to achieve and what they may need to do differently to achieve targets.

Frequency of review

KPI’s are likely to change over the course of your business’s lifecycle and as individual positions develop. To ensure KPI’s remain relevant and reflective of the business strategy, they should be reviewed annually as a minimum. In most instances, this review will occur as part of an organisation’s annual performance review process.

KPI reviews will help identify any potential areas of reduced productivity before the problems become critical, for example by identifying where more resources are needed or where additional training is required for struggling employees.

How do you develop KPI’s?

To establish a set of KPI’s for a particular position, it is critical to understand what the desired outcomes are from both the position functions, and from the business unit as a whole. This understanding will then ensure that targets can be set that will drive the behaviour of employees carrying out these functions to align their work with company goals.

An ideal situation is where KPI’s cascade down from level to level in the business. This helps employees to work in such a way that their activities are aligned with corporate strategy. To do this, prior to developing and implementing KPI’s, the following steps need be taken:

·        Review the business strategy and objectives.

·        Identify the key business processes and how they affect the strategy.

·        Identify the linkages between each business unit and how each one impacts on the overall strategy. This step will help to ensure that individual business units and positions have KPI’s that are focused on the same direction and do not have counter productive KPI’s. 

·        Develop draft KPI’s that reflect the strategy and express requirements in measurable behavioural terms.

·        Consult with stakeholders to ensure that each KPI is aligned with the organisational KPI’s.

KPI’s can cover many areas and there are several measures that could be set for each role.  When developing the KPI’s for a specific position, you will need to map out between 5 – 10 critical factors that need to be addressed to ensure that a role is performed effectively.  This list can then be used to then develop 2 -3 KPI’s for the role.

What can be measured as a KPI?

Anything that can be measured can become a KPI, however not all measures will necessarily be of value to your business. There is no one size fits all approach for KPI’s as they can between individual businesses and industries.

To identify the right KPI’s for your business it is important to be clear about the objectives and strategic directions. Pick only the key indicators that are relevant and meaningful for your business, and that can be used by everyone in the business to inform decision-making.

Examples of what can be measured may include:

In providing support and assistance to our clients, we commonly find that although employers are familiar with the term ‘probation period’, there is less awareness of the Fair Work Minimum Employment Period, what it is and how the two periods differ.

In this article, we provide clarification regarding the two terms and how they operate in practice,
particularly as the distinction between the two can become blurred.

Fair Work Minimum Employment Period or ‘Qualifying Period’

The Fair Work Act 2009 provides that to be eligible to make an unfair dismissal claim against an
employer, a dismissed employee must have completed a “minimum employment period” of

·       6 months if the employer employs 15 or more employees, or 

·       12 months if the employer employs fewer than 15 employees.   

The Fair Work minimum employment period will apply to an employee, irrespective of whether it is detailed within an employment contract.

The minimum employment period operates to provide an employer with an opportunity to terminate the employment of an employee during the applicable period without risking the
potential consequences of an unfair dismissal claim. However, once an employee has completed the applicable minimum qualifying period of 6 or 12 months, they will receive full protections and will have the right to make an unfair dismissal claim should their employment be terminated.  As
such, once the minimum employment period has been completed, it will be essential that an employer follow a fair and reasonable dismissal process and have a genuine, justifiable reason prior to termination of employment occurring.

Probationary Periods

In comparison, Probationary periods are a contractual provision that are detailed in an employment agreement. Probationary periods are not provided for or prescribed by the Fair Work Act 2009.

A probationary period is intended to allow both the employer and the employee with the opportunity to assess each other, and the role.  In circumstances where it is determined that an employee is not suited to a particular position or the business, termination of employment within the probationary period may occur.

Probationary periods are commonly set for a shorter period than the minimum employment period, for example 3 months. Where provided for in the employment contract, the probationary period may be extended for a further period in circumstances where an employer requires more time to assess the suitability of the employee.

However, if the probationary period length was to exceed:

·       6 months if the employer employs 15 or more employees,

·       12 months if the employer employs fewer than 15 employees.

the application of the probationary period would not be enforceable, and no advantage would be provided to the employer as the employee would receive the benefit of unfair dismissal protections.

Probationary periods set out in a common law employment contract cannot override the provisions of the Fair Work Act 2009 and both periods operate independently.  As such, the minimum employment period will override the probationary period, for example, if an employee has passed their three-month probation, but are subsequently dismissed after five months employment, they would not qualify for unfair dismissal protections.

To maximise the effectiveness of a probationary period, it is recommended that employers set their probationary periods to be for a shorter period than the applicable minimum employment period. Doing so will enable the employer to ensure that an assessment is undertaken of the employee’s performance and suitability for the role prior to the qualifying period having been completed.

We further recommend that employers:

·       Actively take steps to monitor, review and assess an employee’s performance well before the completion of the qualifying period – making decisions about the employee’s suitability should not be left until the last minute.

·       Monitor and take notice of potential warning signs during the qualifying period. Early warning signs should not be ignored.

·       Ensure that where employment is terminated prior to the completion of the minimum employment period, the employee is provided with the required period of notice (or payment in lieu) and that any accrued annual leave entitlements are paid.

It is important to note that while unfair dismissal provisions will not apply to an employee during the minimum employment period, the employee will still be entitled to general protection provisions. An employee who is dismissed prior to having completed their minimum employment period are not prevented from bringing an “adverse action” claim against an employer under the Fair Work Act 2009 should their termination result from a discriminatory matter.  Care must be taken by an employer to ensure that the reason for the termination is not a prohibited or discriminatory reason so as to minimise of such a claim.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors such as government legislation changes, may not be up-to-date at the time of reading. It is not legal advice and should not be treated as such.

To ensure that due process and procedural fairness is applied, an employee should be permitted to bring a support person with them when attending a formal meeting that relates to their employment. Such meetings where a support person may be present include performance, disciplinary, and termination meetings, as well as meetings held in relation to a workplace investigation (this includes where the employee is being interviewed in the capacity of being a witness).

Although the Fair Work Act 2009 does not specifically state that an employer is required to offer the employee the opportunity to bring a support person to a meeting, an employer cannot unreasonably deny an employee’s request to do so. In order to reduce any potential procedural delays or disputes regarding procedural fairness, we recommend that an employee be advised that they may have a support person in attendance at the time of being invited to attend a formal meeting.

Who can be a support person?

A support person can be a person of the employee’s choosing, and could be anyone from a colleague, union representative, a lawyer, friend or family member.  The role of the support person is to provide moral and emotional support for the employee only. The support person is not there to answer questions or to speak on behalf of the employee. Similarly, they cannot engage with or disrupt the meeting. The support person may however offer advice to the employee throughout the meeting and take notes.

Can we determine who the employee brings as their support person?

As an employer, while you may request that the employee inform you who it is they intend to use as their support person, there are only limited instances in which the chosen support person can be vetoed, such as where there will be a conflict of interest (for example, where the nominated support person will be involved in the investigation process in any capacity, such as a potential witness).

What if the support person becomes disruptive?

To minimise the likelihood of a support person trying to intervene in the meeting or overstep their role, it is recommended that steps be taken to inform and/or remind the support person of what their role is and what the boundaries are at the commencement of each meeting. The employee should also be reminded that they can request to speak with their support person privately if required during the meeting.

In addition to notifying a support person of what their role is in the meeting, it is essential that they are also made aware of what confidentiality restrictions they are bound by. Where the support person is also an employee, they should be advised that any confidentiality breaches could result in disciplinary action, up to and
including termination. 

In the event that the employee’s support person does not comply, or they repeatedly overstep their role, the employer should take steps to again remind them of what their role is. If required, the meeting can be ceased until such time that the support person agrees to comply.

If the support person’s conduct does continue, there may be a requirement to speak with the employee to request that they reconsider who they bring with them as a support person going forward.

Should the employer have a support person also?

It is reasonable for the person conducting the meeting to also have a support person present should they feel it is necessary. An employer’s support person can provide support through taking notes during the meeting as well as assisting in with a debrief following a meeting.

There are suitable templates available from the HR Advice Online website resources. If you require assistance with the resources, the process or advice on any other matter, please contact the team at HR Advice Online at advice@stg.hradviceonline.com.au.au or on 1300 720 004.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors such as government legislation changes, may not be up-to-date at the time of reading. It is not legal advice and should not be treated as such.

When engaging a new employee, it is common for an initial probation period to be included in the employment agreement.

The probationary period forms an important part of the recruitment and onboarding process as it provides an opportunity:

·       for both the employee and employer to assess the employee’s suitability for the role and fit within the company, and

·       for the assessment of a new employee’s work performance; and

·       to assess the employee’s demonstrated skills suitability for the position for which they were selected for.

The size of your business will determine the maximum probationary period length which can be applied. The maximum probationary period can be:

·       12 months for employers with 14 or less employees, or

·       6 months for employers with 15 or more employees.

Supporting Employees During the Probationary Period

To help support an employee during their probationary period, there are a number of steps which can and should be taken by you as their employer. These steps include:

·       Establishing clear performance expectations to provide certainty as to what the employee needs to achieve during the probationary period.

·       Checking in with the new employee on a regular basis to understand how they are going and progressing.

·       Providing a mentor or a buddy to support the new employee with settling in and getting used to the culture and working environment.

Completion of Probationary Period

Where the probation period has been completed successfully, it is best practice to:

·       meet with the employ to confirm that their employment will continue beyond the probationary period.

·       provide the employee with written confirmation that they have successfully completed their probationary period.

In circumstances where it is determined that an employee will not successfully complete their probationary period, as an employer you will need to:

·       schedule a meeting to advise the employee that their employment will not be continuing.

·       provide the employee with notification of their termination in writing.

·       provide the employee with notice of their termination as per the NES or applicable award, and

·       pay out any unused accumulated annual leave hours.

On occasion, as an employer you may find that as an employee nears the end of their contracted probationary period, you have not yet made up your mind as whether to offer the individual ongoing employment.  In such situations, you may be able to extend the probationary period for a further period. Any decision to extend an employee’s probationary period must be discussed with the employee and be confirmed in writing.

It is important to note that as an employer, you do not have to wait until the end of the probationary period before taking action. Rather, the decision to terminate the employment relationship can take place at any time within the probationary period. You do however need to be aware that terminating an employee in any circumstance may potentially expose your business to an element of risk, this includes during the probationary period.

Although employees who are terminated within their probationary period would not meet the eligibility requirements to lodge an unfair dismissal claim, they would be able to lodge a general protection claim.  General protections are intended to protect workplace rights, protect freedom of
association, provide protection from workplace discrimination or other unfair treatment.  As such, prior to terminating an employee during their probationary period, it is recommended that the employee be made aware that they are not performing and be provided with the opportunity to improve. 

Prior to terminating an employee within their probationary period, it is recommended that you contact a member of our HR Advice team so that we can assist you with minimising any potential areas of risk.

If you require advice or assistance with understanding your obligations or how to effectively apply probationary periods, or should you require support regarding any HR matter, please contact the team at HR Advice Online at advice@stg.hradviceonline.com.au.au or on 1300 720 004.

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up to date at the time of
reading. It is not legal advice and should not be treated as such.

Performance reviews can be defined as the process of:

·       identifying,

·       evaluating and

·       developing

the work performance of an employee to help achieve the goals and objectives of the organisation. Performance appraisals further provide an employee with recognition, feedback, career guidance and development opportunities.

The performance review process involves a manager meeting with their direct reports on a one-on-one basis at regular intervals (at least annually) to discuss and review work performance and future development requirements. The appraisal discussion should cover areas such as:

·       Operational requirements and the individual employee’s contribution to the achievement of
the organisation’s objectives during the review period,

·       Assessing whether the staff member is meeting the expectations of their position description

·       Giving and receiving positive and constructive feedback

·       Setting performance and development objectives for the year ahead. This includes helping the employee to plan their career development.

·       Providing clarification regarding roles and responsibilities where required to help staff
reflect, plan and review their work performance.

In addition to supporting the facilitation of a culture of open communication within the business, the performance review process can support employers with making decisions about salary increases, position gradings or classifications and improving budget forecasts for the coming financial year.

Setting Organisational Performance Standards

Conducting an effective performance review does require clear performance objectives and performance standards be established and communicated with employees.

Performance objectives describe what is to be accomplished by the individual employee and/or their team over a defined period of time, and need to be SMART (specific, measurable, achievable,
realistic and time-based).

Performance standards then define the standard of performance (the actions, behaviours or results) to be achieved that are necessary for satisfactory performance and to achieve the objective.

Developing Performance Standards

To help ensure that performance standards are fair and useful, they should:

·       Be based on work performance and objective outcomes

·       Accurately reflect performance and performance variations

·       Be based on observations which are documented and job-related

·       Recognise the realities of the work to be performed

·       Draw on a clear, well-written position description

·       Be aligned to the organisation’s strategic and operational objectives

·       Be agreed upon by all parties.

How to prepare for a performance review meeting

In order to make the performance appraisal session beneficial for all parties, it is essential to prepare beforehand. Preparation may include:

·       Reviewing past review documentation and the objectives set by the employee in their last
review.

·       Review the employee’s position description

·       Think about the employee’s recent work and whether they have met these expectations.

·       Identify areas where the employee has excelled and gone above and beyond expectations,
as well as areas for improvement.

The employee should be asked to complete a self-assessment of their own performance and development over the review period. By completing a self-assessment, the employee will be provided with time to think honestly and accurately about their own performance. As part
of this process, the employee should be asked to:

·       Rate how well they think they have achieved their objectives,

·       Identify opportunities for improvement,

·       Assess their strengths and weaknesses and

·       Note any other issues they would like to raise in the appraisal meeting itself.

The manager should receive the employee’s completed self-assessment at least two days prior to the scheduled appraisal meeting to enable them to review and consider the responses provided.

In advance of the meeting, consideration should be given as to how to best phrase comments and how potentially negative feedback will be delivered. Although it is important to point out both strengths and weaknesses, it will be more effective to discuss positive aspects of performance first. Try to avoid providing appraisals which are completely negative. Be constructive, rather than destructive.  If there are weaknesses, point them out, but emphasise what can be done to rectify the situation.

Tips for conducting a performance review discussion

·       Commit to the scheduled meeting time – avoid having to reschedule the employee’s appraisal meeting and show that the appraisal is important. It may help to schedule the meeting for first thing in the morning so that the likelihood of being caught up by other demands can be minimised.

·       Ensure that enough time is allocated to the meeting to allow for a meaningful discussion to occur (we suggest at least 1 hour)

·       Arrange for the discussion to be conducted in a quiet location. Ensure there is privacy and can avoid interruptions

·       Start the appraisal discussion with a positive tone and warm greeting – Ensure that the employee understands that the discussion should be a two-way conversation, with their constructive, open and honest feedback being critical to being able to discuss their achievements.

·       Set the agenda. Explain the importance of the appraisal process and that the purpose is to focus on the employee.

The discussion should focus on the employee’s performance and outcomes, their results and achievements and how well they met the objectives set in their last appraisal. The conversation
should cover the following areas:

·       What objectives were met?

·       What was not met and why?

·       What development has the employee shown since the last review?

·       What contribution has the employee made to the team?

·       Does the employee enjoy their role? What aspects do and don’t they enjoy?

·       Does the employee have a clear understanding of their role, the department’s role and how these contribute to the organisation’s overall success?

·       What career progression plans does the employee have? How can these be achieved?

·       What specific targets can be set for the year ahead?

·       What training needs are required to fulfil these objectives?

·       What other issues would the employee like to raise?

Post-Review meeting actions

Following the appraisal meeting, the manager should:

·       Complete any required documentation – write up the appraisal notes, including any actions that need to be taken

·       Make sure the action points are completed – for example, if there has been a commitment to exploring further training or arranging meetings with other departments, set up these sessions as soon as is practicable.

·       Periodically check the employee’s activities to determine whether or not goals discussed at
the meeting are being attained.  It is recommended that managers meet 1:1 with their employees at least once per month to discuss ongoing goals.

·       Offer the employee assistance in achieving objectives.

If you require advice or assistance regarding preparing for, or conducting performance reviews with your employees, or should you require support regarding any HR matter, please contact the team at HR Advice Online at advice@stg.hradviceonline.com.au.au or on 1300 720 004.

Performance Management Online is a new cloud-based system. Supported by HR Advice Online, it is automated and customisable to your business needs. Simplify the process. Ask us how.  

Information in HR Advice Online guides and blog posts is meant purely for educational discussion of human resources issues. It contains only general information about human resources matters and due to factors, such as government legislation changes, may not be up to date at the time of reading. It is not legal advice and should not be treated as such.