KPIs Are Not for Rewards or Punishment—They Are for Improving Performance
Introduction
Key Performance Indicators (KPIs)
were never designed to be tools of judgment, rewards, or punishment. Their true
purpose is to create clarity, guide improvement, and drive organisational
learning. However, in many Sri Lankan industries such as manufacturing,
banking, public sector operations, and even logistics KPIs are frequently used
only at the end of the year to justify increments, bonuses, or disciplinary
actions. This reactive approach undermines their strategic value and creates
fear rather than improvement.
KPIs as a Learning and Improvement Tool
KPIs should function as
continuous feedback mechanisms that help individuals and teams understand
whether they are progressing toward strategic objectives. According to
Armstrong (2020), KPIs support performance by making expectations measurable
and enabling constructive conversations between employees and leaders. When
treated as a developmental tool, KPIs help employees identify skill gaps,
resource needs, and process inefficiencies instead of feeling policed.
Misuse of KPIs in Sri Lankan Organisations
In many Sri Lankan workplaces,
performance reviews tend to be administrative activities rather than learning
opportunities. Research shows that when KPIs are used solely for evaluation,
employees become disengaged and focus on meeting numbers rather than improving
behaviours or processes (Aguinis, 2019). For example, in some Sri Lankan
manufacturing firms, KPIs such as daily output or rejection rates are used
mainly to penalise workers, discouraging innovation and open communication.
Similarly, in the public sector, KPIs are often introduced to satisfy audit
requirements rather than genuinely enhance performance, resulting in symbolic
compliance instead of meaningful progress.
KPIs Need to Be Fair, Transparent, and Aligned
A proper KPI system supports
continuous improvement by encouraging collaboration and problem-solving.
Parmenter (2015) stresses that KPIs must be leading, not lagging
indicators focusing on behaviours and processes rather than just results. When
employees understand the rationale behind KPIs and participate in setting them,
commitment and ownership increase (Grow.com, 2024). CIPD (2023)
highlights that transparent and co-created KPIs significantly improve
engagement and reduce resistance to performance measurement.
Conclusion
KPIs are powerful when used
correctly. They are meant to guide improvement, not to reward a few or punish
many. For Sri Lankan organisations to truly benefit from performance
management, KPIs must be repositioned as tools for learning, collaboration, and
continuous progress. When KPIs shift from fear to empowerment, organisations
build stronger capability, higher engagement, and sustainable performance.
References
Grow.com (2024). The Controversy Over KPI Metrics in
Performance Management. [online] Medium. Available at:
https://medium.com/@grow.com/the-controversy-over-kpi-metrics-in-performance-management-9053cec9bed0
[Accessed 22 Nov. 2025].
Aguinis, H. (2019) Performance Management for Dummies. New York: Wiley.
Armstrong, M. and Taylor, S. (2020) Armstrong’s Handbook of Human Resource Management Practice. 15th edn. London: Kogan Page.
CIPD (2023) Performance Management Factsheet. London: Chartered Institute of Personnel and Development.
Parmenter, D. (2015) Key Performance Indicators: Developing, Implementing,
and Using Winning KPIs. 3rd edn. New Jersey: Wiley.
Your explanation of KPIs as tools for learning rather than judgment is very clear, and you show well how misuse in Sri Lankan organisations creates fear instead of improvement. You also highlight the value of fairness and transparency in a simple and strong way. The only thing you could add is a brief practical example to make your points even more grounded. Overall, you give a meaningful and well-focused view on how KPIs should really support performance.
ReplyDeleteThis is an important post which is many misunderstood perspective sometimes .Your post clearly addresses the meaning of KPI.Many organization still treated KPI as a tool for reward or punish employee which creates pressure,resistance and fear.but KPI provides guidelines ,inform or judgement on employees' work flow and it is a source of continuos improvement.They pointed out what's working well,where support needed and any process amendment.It should clearly communicate to employees for guidance not to be pressurized but to more engage and improve performance .
ReplyDeleteKey Performance Indicators (KPIs) should be viewed as tools for learning, not mechanisms for reward or punishment. When organizations use KPIs to understand gaps, identify strengths, and improve processes, employees feel supported rather than judged. This encourages openness, continuous improvement, and genuine engagement with performance goals. KPIs provide clarity, align teams with strategic priorities, and highlight where coaching or resources are needed. When communicated transparently and used constructively, KPIs help build a culture of growth and accountability. Ultimately, their true value lies in guiding better decisions and enhancing overall organizational performance—not in evaluating individuals punitively.
ReplyDeleteAs Aguinis (2019) points out, when key performance indicators (KPIs) are treated solely as evaluation or punishment tools, employees tend to prioritize achieving numerical goals rather than developing skills or improving work processes. noted by Aguinis (2019), when key performance indicators (KPIs) are treated purely as evaluative or punitive tools, employees tend to prioritise meeting numerical targets rather than developing competencies or improving work processes. This trend is visible in several Sri Lankan manufacturing contexts, where metrics such as daily production or defect rates are primarily used to highlight failures. pattern is visible in several Sri Lankan manufacturing settings, where metrics such as daily output or defect rates are used primarily to highlight failures. Such practices discourage innovation, risk-taking and honest communication, thereby weakening organizational learning cultures. risk-taking, and honest communication, ultimately weakening organizational learning cultures. A similar problem is evident in the public sector, where KPIs are frequently adopted to meet auditing or reporting expectations rather than to drive real productivity improvements. issue is evident in the public sector, where KPIs are frequently adopted to meet audit or reporting expectations rather than to drive genuine productivity enhancements. This leads to token compliance, in which employees complete documentation without committing to the underlying goal of improving performance. symbolic compliance, where employees complete documentation without engaging with the underlying purpose of performance improvement. As a result, the system reinforces administrative routine rather than fostering capacity development, accountability or strategic alignment. instead of fostering capability development, accountability, or strategic alignment.
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ReplyDeleteKey Performance Indicators (KPIs) are designed to measure progress and guide improvement rather than to serve as tools for rewards or punishment. When used effectively, KPIs provide clear insights into individual, team, and organizational performance, helping identify areas that need development or support. They encourage data-driven decision-making and create opportunities for constructive feedback, coaching, and skill enhancement. Misusing KPIs as a basis for rewards or penalties can lead to stress, disengagement, and a fear-driven work culture. Instead, focusing on continuous improvement fosters accountability, motivation, and professional growth. When employees understand that KPIs are meant to support their development and align efforts with organizational goals, they are more likely to embrace them positively. This approach strengthens performance, drives results, and builds a culture of learning and collaboration.
ReplyDeleteGreat insights! KPIs are indeed meant to guide improvement and foster learning, not just to reward or punish. It’s interesting how you pointed out that in many Sri Lankan industries they’re often misused, which can create fear instead of motivation. Using KPIs proactively to track progress and support development would definitely unlock their true strategic value. Thanks for highlighting this important perspective!
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