It's easy to get bogged down in how organisations measure work activities. Performance objectives and key performance indicators are terms used to describe how business units and employees perform, but these two terms are not the same. Performance objectives describe what employees must achieve and indicators are measurements that demonstrate what objectives are achieved.
What to Measure
Before you can understand the relationship between key performance indicators and performance objectives, or goals, consider the notion that it's possible to try to measure everything, including the work activities of people, machines and automated computer programs. An organisation should focus on the most meaningful measures for each work activity; these will be the KPIs.
It is the manager's role to understand the relationship between an organisation's KPIs and strategic objectives. A manager has the even tougher job of explaining this relationship to all workers under his supervision. If he cannot explain how they are related, he cannot expect employees to achieve the optimal levels of performance, based on individual and group performance measures, at the end of their year of performance evaluation.
Putting Performance into Numbers
A manager evaluates employee performance to realise the organisation's objectives, ensuring that the sum of individual worker contributions will add up to joint achievement of these objectives. During a year of performance evaluation, a manager must measure each employee's contribution through progressive measurements. The challenge of key performance indicators is that a manager must express in numbers, or quantify, what targets an employee must reach to represent a completed objective.
A performance indicator must show how employees are doing in progression toward their individual and group goals through positive feedback. In "The Management Bible," Bob Nelson and Peter Economy give the example of the employees who need to raise their average number of inventory transactions from 50 transactions daily to 75 transactions daily. "You might consider publicly posting a summary of employees' daily transaction counts at the end of each week while praising these employees in your weekly department staff meeting," explain Nelson and Economy.