Why employee KPIs are a bad idea

For some strange reason that we cannot fathom, individual Key Performance Indicators (or KPIs) are still widely used as a way to determine how well employees are doing their job. But why?

Sure, in theory, KPIs are supposed to offer a clear-cut and objective way to measure and assess an employee’s performance. Each team member is given a series of personal goals to meet across a window of time, and a manager then evaluates whether they succeeded. While people who perform well are likely to be rewarded with bonuses or promotions, not ticking off your KPIs might put your job at risk. It sounds logical enough, but there are some major problems with this concept.

If you’re a business owner, there’s nothing to gain by pressuring your team members to hit arbitrary personal targets. Quite the contrary. The reality is that KPIs do not accurately measure how good someone is at doing their job and can create a bunch of additional negative consequences for your employees and for your business. You might know that we work quite differently at Cliniko, and avoiding individual employee KPIs is part of this! Here’s why.

Rather than helping, KPIs end up:

1. Negatively impacting employee performance

The real kicker is that KPIs and reward-based systems often have a negative effect on an employee’s performance. It isn’t just that this approach doesn’t work—it can actively harm someone’s capacity to do their job well!

Daniel Pink’s discussion of motivation has been formative to the way we think about work culture at Cliniko. Pink draws on various psychological studies to highlight how flawed traditional approaches to motivation really are. For example, most businesses have conventionally used a carrot-and-stick approach to get people to perform well at their jobs in a weird bribery system (i.e. you reward high achievers and penalise low performance, using KPIs to assess). But the research shows that this doesn’t actually work for any job that requires thought or creativity.

Due to a strange quirk of human nature, it turns out that when you try to incentivise people based on performance for these kinds of tasks, they start to underachieve. It sounds completely counter-intuitive, we know, but it’s well-documented. (If you’re curious to read more, you can check out this article in The Harvard Business Review or this paper in The Review of Economic Studies).

We won’t go into all the details of these studies here, but the research is clear: in the modern workplace, where people are expected to be innovative and creative, self-direction is by far the best option. As Pink explains, giving employees the freedom to focus on the work they enjoy means they’ll self-motivate—which ultimately means there’s no need to have KPIs to monitor or measure performance.

2. Consuming everyone’s time

Formulating, discussing, and agreeing on KPIs eats up everyone’s time and bogs a business down in bureaucracy. It then takes additional time to oversee whether these targets are being achieved, which often becomes a significant part of a manager’s duties (and is part of why we’ve never had managers at Cliniko, but that’s a whole other conversation!). Time is precious and could be much better spent on more important things.

For example, the fact that our development team doesn’t have to hit strict targets gives them the freedom to develop features that they otherwise probably wouldn’t prioritise. We recently added a tricky function into Cliniko that allows practitioners to navigate working across multiple time zones with ease. This took years of development work to achieve! If we’d had KPIs, our developers never would have focused on a long term project like this. Yet taking the time to get this new addition to Cliniko right was by far the best thing for our software and our customers.

3. Disconnecting your team from your bigger picture goals

What are the goals of your business? What are you trying to achieve in the world? Whatever your big picture aspirations are, it’s hard to reflect these in your employees’ KPIs. Most KPIs are minutely focused on the individual employee and, in that sense, are likely to be quite divorced from your business’s overall mission. In fact, KPIs may even divert your team’s attention away from your broader goals and encourage them to concentrate mostly ticking off boxes on their own performance lists—and this isn’t a good outcome for anyone.

4. Limiting your team’s creativity

KPIs are rigid and don’t allow for new ways of doing things, changing trends, or lateral approaches. There’s no flexibility or ingenuity allowed in a world where KPIs rule. And yet, doesn’t every business owner want their team to be bringing their full range of skills, knowledge, and creativity to the workplace? That’s where the magic happens, and your business really flourishes. KPIs will only get in the way of that.

For example, at Cliniko, our support team doesn’t have to get through a certain number of customer queries per day. In fact, our founder Joel actively encourages staff to follow their interests and pursue activities at work that may not be directly related to customer support. And this brings enormous—and oftentimes unforeseeable—benefits to the company. This flexibility was what allowed our video queen Rachel to use her love of performing to find a new way to help our customers.

As Rachel says, “Not having KPIs meant I could focus on learning video editing and script writing. In turn, those videos have reduced questions and inquiries we receive, but they wouldn't have existed if I couldn't take the much-needed time off tickets.” 

5. Diminishing your work culture

If your employees are focused on their own KPIs above all else, you’ll eventually see collaboration and teamwork go out the window. When team members are rewarded solely for addressing their individual goals, there’s no incentive for them to cultivate other qualities that are nonetheless important in a workplace. KPIs won’t recognise the person who’s a caring colleague or reward someone for bringing their kindness and empathy to work. Over time, this can only create a poor work culture within your team, as everyone concentrates on themselves and the list of goals they’ve been told to reach, to the exclusion of anything else. 

This rigid focus on goal achievement at all costs can also eventually affect a company’s capacity to behave ethically. At Cliniko, this is another key reason we’ve avoided KPIs. One key example is giving our marketing team the freedom to make decisions that feel right for our brand, rather than just focusing on business growth at all costs. We’ve spoken before about how we choose not to spend money on platforms like Facebook and Instagram for ethical reasons (even though it disadvantages us), because we don't like the way that Meta conducts itself. If we were fixated on KPIs, this choice wouldn’t really be justifiable, but because we're not, we can make decisions based on what we think is right.

6. Being artificial and arbitrary

It’s pretty much impossible to formulate KPIs that are comprehensive and well-rounded enough to capture the full scope of a person’s job. More likely, an employee’s list of KPIs is whatever they and their manager could come up with in the moment, so they’re ultimately a very simplified metric. They’re usually worded in a way that’ll make them quantifiable enough to write down on a piece of paper, but this also means they’re arbitrary and artificial. And, therefore, not very useful.

7. Dehumanising your team

KPIs make work mechanical and robotic, removing as much of the human aspect as possible. But nobody wants to perform to a metric—it’s fundamentally dehumanising for your employees and doesn’t convey to them that they’re respected and valued in the workplace. 

So, ditch the KPIs!

Given all of this, it mystifies us that so many companies persist in using KPIs for their employees. At Cliniko, we’ve seen how business thrives when people can bring their authentic selves to work—and KPIs will never allow for this.

Ultimately it becomes a self-fulfilling prophecy: the fact that we don’t use KPIs at Cliniko contributes to why we don’t need them. There’s no need to monitor employee performance because our team members are self-directed and invested in the big picture goals of the company, which is also partly the result of not being constantly monitored! For this to work, it’s crucial to get your hiring right and find the right people for your business. But there’s no denying that the best results come from treating your team with respect and allowing them to be genuinely autonomous.

Give your team the freedom to simply do their jobs, and to direct all their focus and drive towards the big-picture goals of your business. In this chaotic world of increasing automation and artificial intelligence, human beings who are switched on and capable have never been more valuable. And if you want the most from your staff, creating a workplace where they can show up as their best selves is essential.