This page provides a brief description of each performance area in the KPI Inventory. Specific sub-areas are highlighted in bold. Each section outlines key considerations from a business and social perspective, as well as pointing to further resources
Ultimately, the aim of any company is to make enough money by selling goods and services at a price that exceeds the costs of providing these goods and services. What counts as ‘enough’ will depend on the specific business objective – some SMEs may simply be aiming for survival to provide a steady income stream to their owners, while others will be looking for ambitious growth. Financial indicators, standardised over many years of practice, apply with very minor differences across geographies to measure performance. These are critical as without financial success, companies cannot create wealth and there will be no value to distribute among stakeholders, including owners, management and workers.
Increasingly, the means of achieving financial success have become part of commercial performance toolkits. Popular frameworks such as Kaplan & Norton’s Balanced Scorecard also stress non-financial measures, viewing organizational performance from different perspectives such as:
- How do customers see us? - Customer perspective
- What must we excel at? - Internal process efficiency
- Can we continue to improve and create value? - Innovation and productivity
Quality is sometimes included as a dimension in its own right, or – as in this KPI Inventory – integrated into all commercial performance topics.Further resources
Human Resource Management (HRM) is the process of managing people within an organization. While for many it brings to mind formal structures – such as a Human Resources department - in SMEs there may not even be a person dedicated to managing HR. Instead, we need to consider HRM as ‘bundles of practice’ describing how SMEs recruit, hire, deploy manage the performance of their employees.
The purpose of HRM is to create a system that can maximise the effectiveness of employees in serving company objectives . While other topics measure this system in use, HRM focuses on the system in place: In particular the set of processes, policies and procedures. It therefore covers areas such as recruitment, training and skills development, contracting, performance management issues such as discipline and dismal and overall levels of employee satisfaction. Effective HRM systems can be considered the foundation of productivity and working conditions outcomes. Good HRM can also provide concrete operating benefits, such as improvements in worker retention as well as lower defect rates.
A fair income and adequate social protection through benefits are critical to people’s day-to-day lives and the well-being of their families. A business that provides regular, decent wages is more likely to have motivated workers who are a greater asset to the company.
Remuneration is among the most important conditions of work, and the most contentious. When wages rise in line with productivity increases, they both are sustainable and create economic growth by increasing households’ purchasing power. However, wages that outstrip productivity increases can disincentivise workers and cripple businesses through unsustainable costs, leading to job destruction.
Most countries regulate income and social protection for wage employment. For example, minimum wages are often set by law or regulation and social protection laws regulate access and contribution to health, unemployment and other insurances as well as pension systems. SME-focused interventions often concentrate on measuring compliance with legal employment conditions. Increasingly, however, many businesses are committed to going beyond legal requirements, for example, paying workers above the minimum wage.Further resources
The ILO estimates that 2 million people die each year from work-related accidents or diseases. A further 317 million people suffer from work-related diseases, often caused by poor health and sanitation practices, and there are an estimated 337 million fatal and non-fatal work-related accidents and injuries per year.
As a consequence of worker sickness, disease and injury, businesses face losing skilled staff, increased absenteeism, and higher insurance premiums. Improvements in occupational safety and health avoid harming workers and enhance productivity by reducing the number of businesses process interruptions. This can be achieved through preventative risk management and awareness measures that seek to eliminate risks and introduce safe practices, as well as measures that mitigate the impact of risks should they materialise by providing access to resources, such as personal protective equipment (PPE).
Businesses have legal obligations to assure proper occupational health and safety conditions for workers. But in SMEs, measuring occupational safety and health (OSH) improvements can be a challenge. Accidents or near-misses are often underreported, particularly where incentive systems reward accident-free workplaces. Enterprises that start to put a lot of emphasis on OSH might first see an increase in their accident statistics due to improved reporting. Specific risks also vary by sector, including the probability of exposure to a hazard, the gravity of exposure, and the number of workers likely to be affected. Many industries have long experience in dealing with OSH risks, particularly relating to the handling of chemicals and other harmful substances, and operation of equipment and heavy machinery.
Harassment and abuse at work can take a number of different forms. It can be in the form of physical assaults or threats of violence, or it can be psychological, affecting mental health and well-being – expressed through bullying or harassment on many grounds, including gender, race or sexual orientation.Further resources
Working time is the period of time that a person spends at their place of employment. This covers the working hours spent at work, which consists of both normal working hours and overtime (that are worked above the normal full-time hours). It also covers time spent not working – both at the workplace (such as daily rest periods) as well as leave time away from the workplace (annual leave, sick leave, parental leave).
International Labour Standards and national laws regulate working time. For industrial enterprises, international standards limit regular (pre-overtime) working hours to 8 hours each day, 48 hours each week, subject to certain exceptions. They also say that workers must have at least one day off in seven. Regular and overtime hours and weekly rest may be stipulated in national laws, regulations or agreements between worker(s) and employer(s), which may be more flexible.
Working excessive hours poses a danger to workers' health and to their families. Decent working hours, in contrast, can ensure higher productivity while safeguarding workers' physical and mental health. Under-employment can also be an issue. Working in a job that provides ‘too few’ hours can have serious ramifications for the economic livelihood of workers. Although the worker may be able to find part-time work, the part-time pay may not be sufficient to meet their basic needs.Further resources
Trustful cooperation between workers and management is critical to business continuity and success. Freedom of association means the right of workers to create and join organizations (unions) of their own choosing that represent their needs and interests. Collective bargaining in companies is the process of negotiation between unions and management, usually regarding terms of employment and conditions in the workplace. Both, freedom of association and the right to collective bargaining, are linked. Without freedom of association, collective bargaining cannot work because the needs and interests of the workers cannot be properly represented. Workers themselves must be free to choose by whom and how they are represented in collective bargaining.
The aim is to identify and resolve problems collectively. But when things go wrong, workers also need to have the ability to communicate their grievances individually, without fear of discipline or retribution, through secure, confidential complaint channels. The business benefits of strong worker commitment and loyalty can be significant. Workers can offer a valuable perspective on production processes, and regular information-sharing and consultation with workers has been shown to lead to greater productivity and quality, higher retention rates, fewer accidents and reduced absenteeism. On the other hand, the costs of conflict in the workplace can be significant, including high staff turnover, work slowdowns, strikes, and extreme events such as sabotage.Further resources
Unacceptable forms of work take place in conditions that deny fundamental principles and rights and put at risk the lives, health, freedom, human dignity and security of workers or keep households in conditions of poverty. While many of these unacceptable forms are covered in other parts of the toolkit, this area has a special focus on child labour, forced labour, modern slavery and human trafficking.
These forms of work are often top of mind for governments, regulators, buyers and the public at large, exposing companies to severe reputational damage if they are found guilty of them. On the other hand, businesses that protect their workforce and safeguard them from undue harm can be rewarded by strong employee loyalty and consumer confidence.
Forced or compulsory labour is any work or service that is exacted from any person under the menace or threat of a penalty, and which the person has not entered into of his or her own free will. It can take many forms. In most cases it is characterised by a threat of physical or psychological penalty or the suppression of rights or privileges. Deciding whether work is performed voluntarily or compulsorily often involves looking at external and indirect pressures, such as the withholding of part of a worker’s salary as part repayment of a loan, or the absence of wages or remuneration, or the seizure of the worker‘s identity documents – which may serve as proxies for the presence of forced labour in an SME context.
Child labour refers to work that is mentally, physically, socially or morally dangerous and harmful to children. In its most extreme forms, children are exposed to physical, sexual or psychological abuse. Not all work done by children is classified as child labour. ILO conventions sets the general minimum age for admission to employment or work at 15 years (13 for light work) and the minimum age for hazardous work at 18 (16 under certain strict conditions). It provides the possibility of initially setting the general minimum age at 14 (12 for light work) where the economy and educational facilities are insufficiently developed.
Performance measurement frameworks rarely seek to directly capture the presence of these unacceptable forms of work, as many forms of it are illegal and often hidden. Instead, performance measurement tends to focus on policies, processes and ‘systems in place’.Further resources
All companies, including SMEs, should base employment decisions on the principle of equal opportunity and fair treatment. Within a workplace, people should be hired, evaluated and compensated solely based on their ability to perform a job. For employers, this helps ensure a harmonious and productive workplace, free from tensions.
Discrimination includes any distinction based on race, color, gender, religion, political opinion, national extraction or social origin that results in unequal treatment. Other grounds of discrimination may be included in national law, such as disability, HIV/AIDS status, age and sexual orientation. Discrimination may be direct or indirect and does not have to be intentional, but it may reflect deep seated cultural biases.
Some companies seek to move the needle by introducing policies to promote diversity. This positive discrimination is designed to protect disadvantaged or excluded groups and provide them special opportunities.Further resources