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The Impact of Key Performance Indicators (KPIs) on Talent Development

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This Paper is one of the most important papers which focus on Key Performance Indicators in relation with talent development which start to be the main focus of all companies and countries and most researchers start working on the same subject to give more insights on it. This paper aim to explore the importance of Key Performance Indicators and its impact on Talent development and the advantages of using the performance management system especially in the large companies where there are difficulties in assessing employees' performance. The importance of this research is the well develop and design comprehensive framework about the establishment, use and evolution of key performance indicators and how specialists can use the tools and implement process step by step with the highlighting of all challenges and limitations. The challenge is in the KPIs more than calculate the human capital ROI and Talent Development because it's the hardest part where implementing such techniques can restructure all the organization from the bottom line. This level of extensiveness is the place the test exists much of the time, and where the profit of having a decent strategic plan is not completely figured it out. In short, it is a long between joined affix that needs to be concentrated on nearly part by part.
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Vol. 3, Issue 4, pp: (50-57), Month: October - December 2016, Available at: www.paperpublications.org
Page | 50
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The Impact of Key Performance Indicators
(KPIs) on Talent Development
Moetaz Jamil Soubjaki
ALJINAN University in Lebanon, Major: Human Resources Management Group Learning & Development Manager,
AlNahla Group Jeddah, Saudi Arabia PO. Box 116538
Abstract: This Paper is one of the most important papers which focus on Key Performance Indicators in relation
with talent development which start to be the main focus of all companies and countries and most researchers
start working on the same subject to give more insights on it. This paper aim to explore the importance of Key
Performance Indicators and its impact on Talent development and the advantages of using the performance
management system especially in the large companies where there are difficulties in assessing employees’
performance. The importance of this research is the well develop and design comprehensive framework about the
establishment, use and evolution of key performance indicators and how specialists can use the tools and
implement process step by step with the highlighting of all challenges and limitations. The challenge is in the KPIs
more than calculate the human capital ROI and Talent Development because it’s the hardest part where
implementing such techniques can restructure all the organization from the bottom line. This level of extensiveness
is the place the test exists much of the time, and where the profit of having a decent strategic plan is not completely
figured it out. In short, it is a long between joined affix that needs to be concentrated on nearly part by part.
Keywords: Key Performance Indicators, Talent Development, KPIs, Performance Management.
1. INTRODUCTION
Developing Talents is not just a strategy or activity that companies take to reach high level of effectiveness and
profitability, developing talents is a culture that every organization should follow to build a development environment
among its business. No one can takes risk in developing talents without having clear strategic plans where vision, mission,
values and objectives are clear set in line with developing the Key Performance Indicators (KPIs). A company must
establish its strategic and operational goals and then choose the best KPIs metrics which professionally reflect those goals.
For example, if a software company's goal is to have the fastest growth in its industry, its main performance indicator may
be the measure of revenue growth year-on-year. A company's KPIs metrics will be stated in its annual report. Also, KPIs
will often be industry-wide standards, like "same store sales", in the retail sector (Peterson, 2006).
If researchers can evaluate Talents development strategies, they should have firms understand training needs and have a
well design (TNA) Training Need Analysis. Because Talent Development strategies are contingent on workforce needs,
and an understanding of the workforce needs of a developing nation, will provide the contextual background against
which the efficacy of Talent Development strategies is measured (Davidsson & Honig, 2003).
In recent years, several different models have been developed to measure and improve the performance of organizations.
Key performance indicators (KPI), the balance scorecard (BSC), and the business excellence Model (BEM) are more
widely accepted and more effective than others. When measuring performance, it is important for them to select the
appropriate models and indicators (Minogue, 2011). Considering the big picture of Human Resources in today’s corporate
environment, the prevailing problem in companies is a failure to align the “people” strategy with the business strategy.
Although senior leaders say that they recognize the importance of talent, by and large they are not practicing what they
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Vol. 3, Issue 4, pp: (50-57), Month: October - December 2016, Available at: www.paperpublications.org
Page | 51
Paper Publications
preach. A new report from the Human Capital Institute shows that only 17% of surveyed companies say that their
workforce strategy is consistently in line with their business strategy. A big part of this problem stems from managers’
widespread inability to develop their direct reports. A meager 5% of organizations reported confidence in their managers
to grow employees in their current roles and few middle market companies consider outside resources and consultants
to assist them with these challenges (Handley, 2014). It’s clear that employee performance is only growing in importance
as a key business metric. With data and analytics, HR has an opportunity to showcase metrics-based talent management
ROI and take more tangible ownership over performance (McNulty, 2011).
From a talent management perspective, if the “performance differential” between the average employee and the worst
employee is small, (less than 5 percent), it doesn’t make much sense to spend a lot of money on performance management
programs. However, when weak performers produce more than 33 percent below the average, it makes clear business
sense to invest in great performance management and recruiting in order to fix or replace weak performers (Sullivan,
2014).
All organizations should know the value of their assets, whether they are well-performing or weak-performing assets.
Since employees are “our most important asset” it is surprising that only a few firms have taken the time to calculate the
positive performance differential that is provided by top performers and the negative performance differential that the
organization suffers because it keeps weak performers. There are of course more complicated formulas to consider (such
as dollars spent on labor versus dollars of profit earned each year) but the best approach is one that is customized and then
found acceptable to your CFO and your executives (Sullivan, 2014).
Most of the assessment that managers complete focuses on “the person,” including characterizations of their personal
“traits” (i.e. commitment), knowledge (i.e. technical knowledge) or behaviors (i.e. attendance). While these factors may
contribute to performance, they are not measures of actual output. If you want to assess the person, call it “person
appraisal.” Performance is output quality, volume, dollar value, and responsiveness (Sullivan, 2011).
When we interviewed several survey respondents, they said that while they did specify which talent might have high
impact on the business (e.g., leaders, salespeople, etc.) they often did not have a model or metrics to determine why some
talent pools are chosen as high-impact and others are not. The ability to run an effective HR organization and having
measures of how efficiently the HR organization runs, although perhaps helpful in making HR a creditable strategic
partner, is not the difference maker that business impact data are, despite the fact that such efficiency measures are the
most prevalent KPIs metrics used by HR today (lawler, 2003).
2. PURPOSE OF THE STUDY
The purpose of this study is to assess the existence, strength, and direction of a probable impact of Key performance
indicators (KPIs) on talent development. This Research worked with a population of Top managers in Chosen
organizations in Saudi Arabia. A purposive sample of about 150 CEOs, CHROs, CFOs and Top managers have been
selected because they are able to give the researcher the best reports about the Performance Management and Talent
development strategy of the company and they showed the researcher if there existing for the Key Performance Indicators
(KPIs) or Not .
This research will help the Human Resources Professionals who work in Performance Management and Talent
Development Strategies which go with the organization strategy to have full knowledge about all the challenges and the
advantages according to the Talent Development strategy to work with the goals set in the strategic plan. This will allow
Top managerial levels think in very professional ways toward the Investment in their Human Capital and start design the
right indicators which reflect the real results. This research will allow executives convert their management style into
quantitative in all functions which will enhance companies’ performance and profitability and employees’ accountability
and effectiveness. The right match between KPIs and the Talent Development Practices that will reflect may result in
better ROI, performance and satisfaction of Top Management.
Statement of the research problem:
For years organizations that have had what they thought were KPIs have not had the focus, adaptability, innovation, and
profitability that they were seeking. KPIs themselves were mislabeled and misused. Examine a company with over 20
ISSN 2349-7807
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Vol. 3, Issue 4, pp: (50-57), Month: October - December 2016, Available at: www.paperpublications.org
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KPIs and you will find a lack of focus, lack of alignment, and underachievement because of not fully understanding the
importance of the KPIs and this make problem for most of the organizations regarding calculating and measuring the
employees and business results and return on investment (ROI). In the other hand many companies are working with the
wrong measures, many of which are incorrectly termed key performance indicators (KPIs). Very few organizations really
monitor their true KPIs. The reason is that very few organizations, business leaders, writers, accountants, and consultants
have explored what a KPI actually is. Also, KPIs are rarely new to the organization. They have either not been recognized
or were “gathering dust” somewhere unknown to the current management team (Paramenter, 2015).
Despite many studies, a good Talent Management metric for ROI might be a comparison of revenue/labor cost or
operating earnings/labor costs. At the functional level, the same type of higher-level ROI can be applied, for instance, by
measuring the output of an engineering organization using an example such as the number of new products brought to
market within three years. Of course the challenge with high level ROI measurements is that it’s often difficult to directly
correlate actions to results since there can be multiple factors that influence results (Salsbury. 2013).
Most of the companies didn’t take their measurements seriously, so companies must be willing to invest in Talent
Development. Even when hard ROI metrics are a challenge to predict, organizations can examine before/after scenarios
and track results and trends to determine whether Talent Development programs have achieved their goals (Salsbury.
2013).
Some researchers suggested that investment in Talent Development not just by giving training and monetary motivation
incentives, money is not as potent as it seemed to be, many companies tried to implement monetary incentives as their
main tool to motivate employees and have good efficiency in order to increase their ROI. The question that has arisen is if
there are other options of motivating employees that would be equally effective but more costs-efficient and reflect on the
achieving of the organizational strategic goals especially when there is exact key performance indicators (KPIs) that will
motivate the employees to enhance their effectiveness (Herzberg, 2003).
According to many researchers, most of the organizations just take care on operational Talent Development planning and
don’t look at the strategic human capital investment which is the most important function that focus on the organization
performance and ensure that the organization have the right team and right measurements in order to work with the best
leadership criteria and perform with highly productive performance in order to achieve strategic goals and calculate their
return on investment (ROI), moreover study the relationship between the KPIs in Talent Development Management and
the ROI of the investment in Talent Development of the organization is very serious especially in the regions where they
have educated, qualified and enough resources but don’t know how to use it or how to develop it which will affect
negatively on the business and the economy of the country (Gallant, 2010).
Research hypotheses:
To reach the purpose of the study, the following hypotheses were formulated:
H0: There is no statistically significant impact of Key Performance Indicators (KPIs) on Talent Development.
H1: There is statistically significant impact of Key Performance Indicators (KPIs) on Talent Development.
Research questions:
Human Resources Management department play a strategic role in the organization because it deals with the valued assets
which are the employees and as everybody knows that without employees there is no business. This highlights the
importance of the study on the performance, training, recruitment, engagement, retaining and behavior which is the
difficult part in any study, mainly because people always change their attitude and behavior according to the situation.
Organizations should pay more attention to measure the Talent Development and always try to update their programs and
study the impact of all Talent Development factors on the company’s strategic plan. Also they are requested to set very
professional effective designed KPIs for their work. In this study the author offers to gather data, testing and recommend
an answer to the following question:
Which impact the key performance indicators (KPIs) play on Talent Development?
ISSN 2349-7807
International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Vol. 3, Issue 4, pp: (50-57), Month: October - December 2016, Available at: www.paperpublications.org
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3. METHODOLOGY
This Research Paper was written to well identify and clarify The Impact of Key performance indicators (KPIs) on Talent
Development in the Saudi Arabia perspective.
Research Approach:
As per Singh, Y.K. & Bajpai, A.B. (2008), Research approach can be divided into four groups: deductive and inductive.
The significance of hypotheses to the study is the main characteristic point between these two approaches. Deductive
approach tests the validity of assumptions (or theories/hypotheses) in hand, whereas inductive approach contributes to the
emergence of new theories and generalizations. Discussion about research approach is a key and only any experimental
contemplate in any case of the research area. Inside the methodology chapter of the dissertation, researcher should
demonstrate those principle contrasts the middle of inductive and deductive methodologies and define those approach that
have included to the research by breaking down your arguments into several points.
The approach, research design, and research question are all connected. 'Approach' implies something more than those
sorts about information utilized it alludes to the generally introduction to exploration and the kind for asserts that will
make the research. Dissertations can be based on either quantitative or qualitative data, or on a combination of both. The
choice of the type will be based on the preferences and abilities and the appropriateness of the specific approaches of the
subject. The researcher should be able to identify the way he use such data. Quantitative data is mainly valuable when the
researcher want to discover how common particular forms of behavior. Qualitative data is mainly valuable when the
researcher want to discover out why people engage in such behavior (BRYMAN.A, 2003).
In This Research Paper deductive and quantitative methods will be used. As noted earlier, deduction owes much to what
we would think of as scientific research. It includes the development of a theory that is subjected to a difficult test (Collis
and Hussey 2003). Robson (2002) lists five consecutive phases through which deductive research will grow: first,
deducing a hypothesis (where the researcher tests the relationship between two or more variables). Saunders et al (2007)
distinguish the major differences between deductive and inductive research approaches in the following manner:
Deductive methods:
Principles based on science
Movement is done from theory to data
Casual relationships between variables need to be explained
Quantitative type of data is mainly collected
Measures of control are applied in order to ensure the validity of data
Concepts are operationalized in order to ensure the clarity of definitions
The approach is highly structured
Researcher is independent from the research process
Inductive methods:
Meaning of human attachment to events are aimed to be explored
Research context is understood in a deeper manner
Qualitative type of data is collected
More flexible approach to research structure to ensure provisions for changes during the research
Researcher is perceived to be a part of the research process
Research findings do not have to be generalized
Qualitative versus Quantitative research approach:
The distinction between qualitative and quantitative research is a methodological issue. The decision to choose a specific
methodology should be based on its suitability to answer the research questions (Bryman, 1988). Denzin and Lincoln
(1998) asserted that qualitative research emphasizes the process of discovering how the social meaning is constructed and
stresses the relationship between the investigator and the topic studied. Conversely, quantitative research is based on the
measurement and the analysis of causal relationships between variables. Berg (2001) discriminated between qualitative
ISSN 2349-7807
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Vol. 3, Issue 4, pp: (50-57), Month: October - December 2016, Available at: www.paperpublications.org
Page | 54
Paper Publications
and quantitative research arguing that qualitative research referred to the meanings, concepts, definitions, characteristics,
metaphors, symbols and descriptions of things, while quantitative research referred to the measures and counts of things.
Population:
The distinction between qualitative and quantitative research is a methodological issue. The decision to choose a specific
methodology should be based on its suitability to answer the research questions (Bryman, 1988). Denzin and Lincoln
(1998) asserted that qualitative research emphasizes the process of discovering how the social meaning is constructed and
stresses the relationship between the investigator and the topic studied. Conversely, quantitative research is based on the
measurement and the analysis of causal relationships between variables. Berg (2001) discriminated between qualitative
and quantitative research arguing that qualitative research referred to the meanings, concepts, definitions, characteristics,
metaphors, symbols and descriptions of things, while quantitative research referred to the measures and counts of things.
Research tools & Results:
The instrument used in this study, Key Performance Indicators (KPIs) and Talent Development is a standard
questionnaire. The questionnaire based on Likert scale of 4 (from Very Important to Not Important & from Very Capable
to Lacking in Capability & from All the Time to Not very often) and a Section of multiple answers is designed divided
into main six sections.
Key Performance Indicators (KPIs) Development
Key Performance Indicators (KPIs) for individual performance
Capabilities and Skills
Learning on the Job
Learning Through People
Learning through Courses and Reading
The Instrument was handed to all 150 respondents which took about 15-20 minutes to answer and were collected
immediately on completion, which resulted in a 100% response rate.
In this study, Cronbach's alpha was used to assess the reliability of the instrument. Then, using data obtained from the
questionnaires and statistical software SPSS the reliability of the questionnaire, Key Performance Indicators (KPIs), 0.970
and for the Talent Development, 0.989 estimated.
4. FINDINGS & DATA ANALYSIS
According to the Data got it from the Instrument I found that 92% are males and 8% are females which 56% of the
respondents are in the age of 26 to 40 and 20% in the age of 46 to 50 where experiences vary between respondents 21%
between 6 to 10 and 21% between 16 to 20 also 21% between 26 to 30. Also I found that 72.7% hold BA/BS, 24% hold
MBA/MSc and 3.3% hold Ph.D/DBA and as per designation I found that 24.7% from the respondents hold the title of HR
Manager. (See the Tables Below)
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As I mentioned before that the questionnaire was designed from seven sections and using the data obtain from section one
“Key Performance Indicators (KPIs) Development” according the questions that measure how important is the “Key
Performance Indicators (KPIs) Development” 29% from the Respondents mentioned that its very Important and 45%
Important which means 74% from the respondents confirmed the importance of the “Key Performance Indicators (KPIs)
Development” for the organization.
As per section two were questions measure the Importance of having “Key Performance Indicators (KPIs) for Individual
Performance” 30% mentioned that’s very important and 50% Important which means 80% from the respondents
confirmed the importance of “Key Performance Indicators (KPIs) for Individual Performance” and as per average 77%
from the respondents are with the KPIs development which is great rate specially in the Arab Region where KPIs is not
well known and not professionally implemented.
As per sections Three, Four, Five and Six where Talent development measured in the companies of the respondents after
applying the KPIs using the categories (Capabilities and Skills, Learning on the job, learning through People and learning
through courses and reading) 68% from the respondents mentioned that after applying the KPIs there is increasing in the
Capabilities and Skills of the employees, 74% from the respondents mentioned that after applying the KPIs there is
increasing in the Learning on job, 79% from the respondents mentioned that after applying the KPIs there is increasing in
learning through People and 80% from the respondents mentioned that after applying the KPIs there is increasing in
learning through courses and reading. According the obtained percentage we can conclude that 75% from the respondents
found Increasing and improvement in the Talent Development after Applying Organizational, Departmental and
Individual KPIs.
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5. CONCLUSION AND RECOMMENDATIONS
The importance of this research is the well develop and design comprehensive framework about the establishment, use
and evolution of key performance indicators and how specialists can use the tools and implement process step by step
with the highlighting of all challenges and limitations. The challenge is in the KPIs more than calculate the human capital
ROI and Talent Development because it’s the hardest part where implementing such techniques can restructure all the
organization from the bottom line. This level of extensiveness is the place the test exists much of the time, and where the
profit of having a decent strategic plan is not completely figured it out. In short, it is a long between joined affix that
needs to be concentrated on nearly part by part.
Using statistics and indicators in organization considered as one of the top criteria for measuring and tracking
performance success and the rating of the desired goals achievements. Key performance indicators (KPIs) are the most
important factor presenting performance among the time using regular tracking and on specific periods. Key performance
indicators (KPIs) are the tools for internal and external evaluation in the any performance management system and should
be choose on professional criteria that help exactly defined the problem in lack of goals achievements. Key performance
indicators of the organization as mentioned are the most important factor in evaluating performance so that specialists
should properly collect, analyze data because it plays major role in taking decision and improving Talent development
and can be good tools for performance judgments.
The results have shown that KPIs Implementation impact directly on the Talent Development. So we have some
suggestions as bellow:
The Human Resources Department of any organization must develop and implement KPIs in line with talent management
and development plans to reach high level of organizational culture based on their attention.
Active talents need Learning, Development and and gaining technology. So for using knowledge and talents of people it
will be better to set a condition for their participation and giving their ideas.
Manager should believe in their people by taking time to talk about their potentials, dreams and goals and how to help
them start to achieve it. This will affect directly their KPIs results and will show fast track improvements.
Organization can use benchmarking systems and take the best from the best specially in the same industries where there is
a lot of successful organization in terms of KPIs implementation and Talent development.
REFERENCES
[1] Eric T. Peterson, The Big Book of Key Performance Indicators, USA, Web analytics demystified, January 1, 2006.
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http://www.go4roi.com/reinventing-retention/.
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[6] John Sullivan. (2014). “Calculating the Dollar Costs of a Bad or Weak-performing employee”. Engaged [web log].
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[7] John Sullivan. (2011). “Performance Appraisal, the Most Dreaded HR Process A List of the Top 50 Problems”.
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[8] Lawler, E. E. & Mohrman, S. A. (2003). “Creating a Strategic Human Resources Organization”: An Assessment of
Trends and New Directions. Stanford: Stanford University Press (a).
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International Journal of Recent Research in Commerce Economics and Management (IJRRCEM)
Vol. 3, Issue 4, pp: (50-57), Month: October - December 2016, Available at: www.paperpublications.org
Page | 57
Paper Publications
[9] David Paramenter. (2015). Key Performance Indicators (KPI): Developing, Implementing, and Using Winning
KPIs”. USA, Wiley; 3rd ed, February 24, 2015 (ISBN-10: 1118925106) (ISBN-13: 978-1118925102).
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[18] Denzin, N. K., & Lincoln, Y. S. (1998). Collecting and interpreting qualitative material. Thousand Oaks, CA: Sage.
[19] Berg, B.L. (2001). Qualitative Research Methods for the Social Sciences. Boston: Allyn and Bacon.
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ABSTRAK Penilaian prestasi merupakan aspek yang begitu penting dalam pengurusan sumber manusia. Hal demikian kerana, pengurusan prestasi dapat membantu organisasi dan individu secara bersama merealisasikan objektif dalam sesebuah organisasi. Melalui sistem penilaian prestasi ianya sangat memberikan kesan positif dan signifikan kepada pekerja kerana penilaian ini berkaitan secara langsung terhadap produktiviti organisasi. Oleh itu, Pihak pengurusan organisasi kerja perlu menguruskan penilaian prestasi dengan baik bagi menerajui keupayaan organisasi merancang dan melaksanakan dengan baik dan berkesan. Dengan itu, pihak pengurusan perlulah memainkan peranan yang penting dalam sistem pengurusan penilaian yang efektif juga mestilah mempertimbangkan bukan sahaja kemahiran dan tingkah laku individu atau seseorang pekerja, tetapi juga sumbangan langsung atau penglibatan individu kepada prestasi pasukan agar dapat membentuk sistem penilaian prestasi yang berkesan dengan menggabungkan sistem penilaian pekerja dan prestasi korporat. ABSTRACT Performance appraisal is a very important aspect of human resource management. This is because, performance management can help organizations and individuals collectively realize the goals in an organization. Through the performance appraisal system it has a very positive and significant impact on employees as it is directly related to organizational productivity. Therefore, the management of the work organization needs to manage the performance appraisal well in order to lead the organization's ability to plan and execute effectively and effectively. Therefore, management must play an important role in an effective evaluation management system must also consider not only the skills and behaviors of individuals or employees, but also the direct contribution or involvement of individuals in team performance in order to form an effective performance evaluation system by incorporating employee evaluation systems and corporate performance.
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