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Using KPIs to Optimize the “Psychological Contract”

The concept of the “Psychological Contract” is a set of unwritten promises and expectations between employer and employee that form a basis for every employment relationship.  More precisely, it’s a “deal” from “the perception of the two parties…of what their mutual obligations are towards each other”.

For an employee, their core obligation is to deliver on assigned outcomes.  For an employer, it’s to provide feedback and give performance evaluations designed to guide employees to succeed.  The effectiveness of that feedback is determined by an employer’s ability to measure whether an employee can deliver against set expectations.  

But for many organizations, there’s a missing link in the process because they lack real visibility to how the KPIs of employee performance are tracking.  Without having necessary data and facts, employers are left interpreting performance rather than judging it objectively, leading to subjective, often unhelpful, feedback and a disruption to the Psychological Contract.  

The Missing Link:  Dashboards and KPIs

All organizations have some form of outcome targets for their employees, but how progress is tracked against those targets can make a substantial difference in how accurately employee performance is managed.  This in turn impacts how successful an employee can become, and by extension, how productive their whole department is.

The necessary tool to achieve this real time insight is a robust dashboard to display the main KPIs at both an individual and team level.   When KPIs come alive on a dashboard, they become a tangible and a real-time guide for employers to let their employees know how they are performing, what they are doing well, and where they need to improve. 

With the ability to measure and visualize these KPIs, leaders can coach and boost productivity both at an individual and team level, and keep employees motivated, goal oriented, and most importantly accountable.  It is often in the coaching/conversation that come from dashboard reviews that employees understand what is required of them in order to meet their obligations.

Fill the Gap to Optimize the Contract

As Peter Drucker said, “if you can’t measure it, you can’t improve it.”

Organizations need to have tools in place so they can be aware of production metrics. A wealth of data is most likely available to any manager, but the goal is to be able to utilize that date in a way that makes it consumable.  Only when this is accomplished and KPIs are available in real time can the missing link in the Psychological Contract be found, one that allows employees to take ownership of their performance and leaders to aim for improvements.