Key performance indicators (KPIs) are an important measure of an employee’s value to an organisation. KPIs measure performance, conduct, attendance, and other indicators that an employee is reaching goals set by the employer to demonstrate the productivity of individuals or teams. This is an example of how not to set and implement KPIs.

The Fair Work Commission (FWC) has found a contractor mechanic’s failure to meet KPIs, when he spent too much time with customers and failed to sell enough batteries, did not provide a fair reason for his termination.

The Commission reinstated the 61-year-old mechanic who brought the case. He worked for Club Assist Pty Ltd, which provides roadside patrol and battery replacement services for the NRMA and other motoring organisations across Australia.

Club Assist dismissed him for:

failing to ensure he sold batteries to customers on at least 24 per cent of the jobs he attended;

taking too long at each callout (against an average working time target of 17 minutes once a technician arrives at a job) and failing to improve;

replacing too many batteries under warranty, against a ceiling of 3.9 per cent.

The employer told the FWC that its patrol technicians are not expected to achieve the key performance indicators each month. It maintained it set KPIs consistent with industry standards, as they are similar to those used by the NRMA for its own employees and those used by other state motoring organisations such as RACV and RACQ.

Club Assist claimed the technician’s performance fell well short of the KPIs for a prolonged period of nearly two years. His battery sales, it said, were consistently below those of his colleagues.

The applicant said the employer ignored the jobs-per-hour KPI, which he said was the most objective and appropriate measure of his productivity.

The decision

The Commission held Club Assist had dismissed the technician solely on the grounds of his capacity, that is, his alleged “poor performance in failing to meet three KPIs”.

The Commission said the evidence presented in the case did not indicate that the technician had received the position descriptions that the employer relied on. The employee was thus unaware of key details of the requirements the employee was obliged to adhere to.

The Commission accepted that the company “was generally able to devise KPIs” to achieve its desired results. The KPIs “[were] not set out or otherwise explained in writing”.

The Commission held Club Assist’s KPIs “might be an acceptable tool to measure general performance comparatively amongst roadside patrol officers”, but “did not form a valid reason” to dismiss the technician “in circumstances where the underlying facts to support the inferences and conclusions drawn as to [his] performance [were] unproven”.

Importantly, the Commission said the manner in which the KPIs were applied assumed that, where an employee failed to meet a KPI, he is guilty of certain performance failings or conduct (e.g., spending too long on jobs, replacing too many batteries not subject to warranties, or not doing enough to convert jobs into battery sales), and is thereafter required to prove his innocence “…[t]he approach is not only unsatisfactory, but unacceptable”.

The Commission said Club Assist manifestly denied the technician procedural fairness, particularly noting that its ‘show cause’ letter omitted allegations about his “assertedly poor attitude”, battery sales, and replacing allegedly sound batteries under warranty.

There was no reasonable or sensible reason for Club Assist to fail to notify the technician that his employment was in jeopardy due to any of these matters before any decision to dismiss was made. If he had been questioned about those issues, “he could have sought to allay concerns about his attitude which had not previously been raised with him and explain the matters recorded by the over-zealous and unhelpful” manager.

The technician sought reinstatement, but Club Assist opposed it, claiming it had lost trust and confidence in him. However, the deputy president found that a sufficient level of trust and confidence could be restored between the parties to make their relationship viable and productive going forward if he ordered reinstatement.

He also accepted the technician’s evidence that if he returned to the workplace, “he will do his best for [the company] and its customers” as a roadside patrol officer.

Lessons

When setting KPIs for employees, make sure that you consult your team about them. Make sure that your staff know about how they can achieve them and if there are any rewards (or consequences) for not meeting them. If employees have a hand in devising them and any reward system that might be attached, you are in a far better place to get the result you want, and, if the opposite is necessary, to be able to show where the employee failed to meet the basic requirements of the job.