Why KPI Management Needs Metrics for Empathy and Fairness

Attend any management meeting or conference and you’ll invariably come across the term “key performance indicators” (KPIs). Espoused by influential management experts such as Peter Drucker and Robert S. Kaplan as a way for businesses to better measure performance and drive progress toward strategic goals, KPIs have become an entrenched and critical component of business operations.

In project management, KPIs are routinely applied to features such as cost reduction, delivery time, resource utilization, and team churn. They can play an important role in moving projects forward by identifying areas for improvement, establishing accountability, and providing ongoing feedback and insight.

While extremely useful in measuring operational efficiency, KPI management in its current form fails to holistically capture and improve workplace experiences and interactions. These have been identified as key factors in performance, increasing markers such as employee satisfaction, productivity, and revenue. To enhance the traditional approach, I developed a management framework with two new sets of metrics: key caring indicators (KCIs) and key fairness indicators (KFIs).

The Power of Empathy in Business

The power of empathy in a business context is often underrated (which makes sense in an environment that typically prioritizes numbers and facts), but a more empathetic workplace has been shown to have clear commercial benefits. A 2021 report from Catalyst found that employees with highly empathetic managers were more than three times as innovative and more than twice as engaged at work than those with less empathetic leaders.

With burnout rife among the workforce, increased empathy could provide an antidote, encouraging engagement with and emotional support from co-workers, which would also serve to boost productivity in the long term. Increased empathy can also mean improved customer service, and the development of products and services that better meet customer needs.

Levels of empathy could in fact be a more accurate predictor of productivity than many traditional KPIs, as we now know there is a clear connection between employee satisfaction and productivity levels. In a groundbreaking 2015 study, researchers at Warwick University found that higher employee happiness levels were associated with up to a 12% rise in productivity. Related research found that companies with a higher score for employee friendliness (EF) achieved better returns than those with lower EF ratings.

Finding ways to boost productivity is more critical than ever. Despite huge technological advances that have relieved the burden of many smaller administrative tasks, productivity growth in the US averaged just 1.4% between 2005 and 2019, according to a 2023 McKinsey study. The same study highlighted the importance of boosting productivity growth, citing “workforce shortages, debt, inflation, and the cost of the energy transition” as “powerful headwinds” that will “be easier to confront with higher productivity.” Creating a business language for empathy, and embedding it into the organization, is therefore as imperative as it is timely.

I implemented my alternative framework to great success while working as CTO at two companies—one in the banking, financial services, and insurance industry (BFSI), and one in education. At both companies, we saw increased employee satisfaction and productivity, with zero churn. The BFSI organization also saw a 400% increase in gross revenue. For project leaders, applying this framework can mean:

• Greater productivity.
• Higher morale.
• More innovation.
• Less churn.

Measuring Empathy and Fairness

In order to develop suitable KPIs, I had to find a way to objectively quantify two intangible factors: empathy and fairness. I wanted to treat these just like traditional KPIs to strengthen their value and encourage people to embody them as they perform their roles.

Empathy is often defined as the ability to understand and share the feelings of others. Psychologists Daniel Coleman and Paul Ekman identified three types of empathy, illustrated in the following examples of how they might manifest in the workplace:

Compassionate empathy encompasses both cognitive and emotional empathy and includes taking action, so it is the most valuable form of empathy.

Empathy is usually present for fairness to manifest, so we can view fairness as a function of empathy. Fairness is impartial and just treatment or behavior, and is a vital component in building healthy relationships and promoting equality, trust, and respect. Fairness often exists as a consequence of having sufficient empathy for your peers; a lack of sufficient empathy leads to low levels of fairness. This is true in the workplace and society.

When it comes to instances of empathy, it is the content and context of the action and the perception of other parties involved that determines the instance’s overall value. For example, if I sacrifice some of my personal time after work to assist a co-worker in their task, and that task is critical, then that is worth a lot more than if I had sacrificed time during work for a task that is not as critical. The former requires a greater sacrifice than the latter.

Using these theories, I developed two metrics to determine the overall score for each instance:

• Key caring indicators (KCIs) measure instances of cognitive, emotional, and compassionate empathy. Because compassionate empathy involves action, it would be awarded a greater score than either cognitive or emotional empathy.

• Key fairness indicators (KFIs) measure instances of just treatment. Actions that demonstrate fairness as well as compassionate empathy would be awarded a KFI score instead of a KCI score. Setting reasonable deadline expectations, or providing equal compensation to two contractors in the same role, is an example of when a fairness metric could be applied in a project environment.

KCI instances may not always contain action and the value of the end result is usually subjective, whereas KFIs involve actions promoting more objective values of justice and equality. KFIs are, therefore, inherently more valuable than KCIs.

KPI Management: Reporting KCIs and KFIs

To report KCIs and KFIs, both parties would log or verify instances and actions. This can be incorporated into the existing human resources platform at your company, such as UKG Pro. Instances would be scored by an algorithm, which takes into account factors such as the level of sacrifice and the impact of the action, on a scale of 1 to 5. KCI and KFI data should be tracked and regularly reviewed alongside other KPIs at management level.

So if a new team member records that a co-worker was kind and considerate during onboarding, giving them an extra hour of help with a particular software system, we would classify this as an instance of compassionate empathy. The co-worker has recognized that onboarding can be overwhelming, and sacrificed additional time to help out their new colleague. The algorithm would score this a KCI 4.

If a team member was praised by leadership for their outstanding work on a project, and, rather than accepting the commendation for themselves, they highlighted the contribution of all the individuals involved, this would be an instance of fairness. The algorithm would score this a KFI 3. Despite the score being lower than the previous example, a KFI would be given more weight when it came to evaluating these metrics.

Managers could implement a balanced scorecard that tracks instances on a quarterly basis and can be used in team performance appraisals and as part of salary review. Over time, the data from this system can also be used to create more balanced teams in which empathy and fairness are continually present. Although individuals can be recognized for demonstrating empathy and fairness, leaders should look to reward teams as a whole.

A New Model for Performance Measurement

There is, of course, still a place for traditional KPIs. And, as companies continue to increase their use of automation, KPIs will be integral in measuring operational functions (i.e., the production of goods and services).

When it comes to improving the holistic quality of human experiences and interactions in the workplace, however, KCIs and KFIs are more likely to be effective at increasing empathy and, therefore, driving long-term satisfaction and productivity.

By taking a data-driven approach and quantifying two important qualities, we can expand performance measurement beyond the mechanics of output. In tracking and monitoring the presence of empathy and fairness, you are elevating the importance of employees’ experiences with one another to mainstream business practice—and protecting your company’s bottom line.