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Why Employees Love KPIs

In his ground-breaking study, “Man’s Search for Meaning: The Case of Legos™,” behavioral economist Dan Ariely discovered something every business owner and executive needs to know if they want to succeed with today’s workers.

He sat his first group of college-student participants before a table full of parts from Lego’s robot-and-lizard-inspired Bionicles series, and paid them a decreasing fee for each character they made. $3.00 for the first one, $2.70 for the second, and so on, until the participant decided to quit.

With the first group, each time they finished a character, he would pay them. Then he took their Bionicle apart right in front of their eyes and threw the pieces back into the pile.

With the second group, he paid them the same amount, in the same way. But this time, he placed their completed Bionicle on a shelf under the table.

Same workplace. Same challenge. Same pay. The only difference was what happened to the completed Bionicle.

The first group, on average, would complete seven before quitting. Which means they quit when they still had the chance to get paid three more times.

However, the second group, on average, made eleven. Which means they earned all they could, and then made another one for free.

How to Make Eleven Bionicles In Any Business

The participants in this experiment didn’t know what Ariley was measuring, as is always the case in studies like this.

Without a doubt, the first group concluded that the completed character was of no value to the researcher. Why else would he take it apart immediately? As the experiment went on, they probably began to feel like they were being watched for some unknowable reason. And as soon as they’d earned $14.70, with only a couple bucks left to go, the creep factor overcame the economic incentive and they quit.

Also without a doubt, the second group concluded the opposite. Their completed character must have been central to whatever Ariley was trying to learn. It was perfectly obvious that he valued them -- why else would he put them away so carefully? And so, as if to help him succeed on his quest, they would produce extra ones even without pay.

When an employee feels like someone in the first group -- producing good work that goes nowhere -- they fall into that dreaded category, the “disengaged employee.” A recent Gallup study found that 71% of employees feel like that.

They build their Bionicle, but no one notices. They feel like someone just took it apart because it wasn’t important in the first place.

The only reason they show up is to get paid, and in fact, in another study Ariley did, he found that the less appreciated people feel, the more money they expect. In other words, if you want someone to show up to be unappreciated and unhappy, they expect to be handsomely compensated for their trouble.

But when an employee feels like someone in the second group, the whole situation flips -- in your favor.

If you take their Bionicle and put it on a shelf for all to see, and if you genuinely thank them for constructing it, then going forward you will undoubtedly receive the best Bionicle’s you’ve ever seen.

Intelligent Bionicles

There’s one piece missing from our metaphor, and that’s understanding.

The people in the study didn’t know what Ariley was trying to learn. Because of that, their Bionicles lacked context.

Even when the second group was making them for free, they were doing it for Ariley’s benefit, not because they knew why he wanted them.

As a business leader, you want to make sure that’s not the case for your employees. It’s critical that they know why they’re doing what they’re doing.

If they know their job is to build Bionicles, and they know why, then as things change with your customers and your vendors and your market, they’ll be able to adapt with the same generosity of spirit they show when making that eleventh one for free.

The Bionicles Are your KPIs

Your people won’t be making Bionicles. They’ll be making their Key Performance Indicator move.

And so the real art of making KPIs work for your business is to make them do two things simultaneously:

  • First, you have to be able to say, "If we get these things right, we'll have good results on our financial statements and increase the value of our company." (Business Execution for RESULTS, Stephen Lynch)
  • And second, as with the Bionicles, you have to be absolutely positive that your employee has all the Lego pieces on their table so they can complete their character.

A perfect KPI measures something vitally important to your success while it is, at the same time, something over which your employee has complete control. Often that will require relating data from one or more of your business applications.  But it will always measure a day-to-day activity.

And don’t forget those participants in Ariley’s study. When your people hit their KPI, make sure you let them know that you value it. 

That makes all the difference.