If you want your business to succeed, knowing it’s working is not enough. You need to know how well every department is doing, whether they are moving in the right direction, and how well they are achieving their goals. In other words, tracking performance is crucial for a healthy business — and Key Performance Indicators (KPIs) play a central role in this.
KPIs are measurable values that act like the business’s vital signs — similar to how heart rate or blood pressure indicate health. For example, KPIs like Cycle Time (the time taken from coding to deployment) or Defect Density (the number of bugs per line of code) provide engineering teams with concrete data to assess their performance, identify bottlenecks, and improve processes. In other departments, KPIs may be used to monitor sales growth, customer satisfaction, or employee engagement.
This guide will explain the basics of KPIs, how to set them effectively, and how they can be used across industries to improve performance and drive growth.
Understanding Performance Management
Performance management is the ongoing process of monitoring, evaluating, and improving an organization’s efficiency. The first step in performance management is performance tracking — after all, you can’t manage something you don’t understand.
There are two major types of performance metrics — KPIs and OKRs. We have a separate article that explains the difference between the two, but for now, let’s stick to the basics.
- KPIs track the success of specific activities or processes. They do not explain “why,” “how,” or “what for”—they only showcase progress towards one particular metric.
- OKRs track the progress toward broad, ambitious goals. They exist to direct the company’s strategy and align it toward one particular set of goals the team will achieve.
OKRs and KPIs are necessary for healthy performance management — and if you want to learn more about OKRs, we highly recommend the Oboard OKR Guide. This article will stick with KPIs and their role in the performance management framework.
Why We Use KPIs
KPIs provide measurable, actionable insights that help track how well teams meet their objectives. For example, if we are looking at a software engineering team and want to see how well they are doing their job, these are the metrics we might look at:
- Lead Time for Changes: The time taken from code commit to deployment indicates the team’s efficiency in delivering new features or updates.
- Deployment Frequency: Tracks how often code is successfully deployed to production, reflecting the team’s agility and ability to deliver value continuously.
- Mean Time to Recovery (MTTR): Measures the average time it takes to recover from a production failure, showing the team’s effective handling and quick issue resolution.
- Code Coverage: Percentage of code covered by automated tests, indicating the quality and reliability of the codebase and the team’s commitment to preventing bugs.
- Defect Density: The number of bugs per line of code or function point. It provides insight into code quality and helps the team identify improvement areas.
In short, KPIs tell you how well the team is doing their jobs. They do not tell you how useful the team is or how well its work is aligned with the rest of the company — that’s what OKRs are for — but provide the objective and relevant performance metrics “in a vacuum.”
However, it is only a part of the equation. At their core, KPIs are not only about performance. They are about trust. Seeing that KPIs are being achieved allows top management to trust their employees. After all, the metrics are being hit, and the owners are getting their money’s worth. As such, any drastic measure, like installing employee surveillance, is unnecessary. However, the gloves might come off if nothing reinforces that trust.
This trust, however, goes both ways. For the employees, KPIs represent a plan, and a company with a plan is a safe workplace. They also guarantee safety because the employees are safe from lay-offs and other drastic measures as long as KPIs are being hit.
How to Find Correct Metrics To Track
Anything can be a KPI as long as you consider it a metric that determines the health of your business. Revenue growth? KPI. Turnaround time? KPI. Customer satisfaction score? KPI. Employee training completion? Believe it or not, KPI.
So… what gives? How do you determine which metrics you want to track are relevant and showcase your team’s effectiveness? The answer is context. Because context is for kings, only with the context in mind can you assemble the KPIs that suit your particular needs perfectly.
Whatever the department or team you manage, you produce a product or a service. It may be sales, leads, customer support, or anything else — the point is that your labor has an end goal that contributes to the company overall.
This is your Big Picture Goal, your main KPI. You should also consider which other metrics contribute towards it — they are your Critical Success Factors and will make for perfect secondary KPIs. For example, if your Big Picture Goal is Revenue Growth, this is what your secondary KPIs might look like:
- Profit Margins: Tracks the percentage of revenue remaining after expenses are deducted, with high margins indicating operational efficiency and cost control.
- Cost Per Acquisition (CPA): This measure reflects the average cost to acquire a customer, helping assess the efficiency of marketing efforts.
- Return on Investment (ROI): Measures the gain or loss generated relative to the initial investment, indicating the profitability of specific initiatives or campaigns.
However, not every metric is measurable. Counting the number of sales closed, leads transferred, customers serviced, etc, is easy. It gets much more difficult with more ephemeral things, like software. Sure, you can measure the KPIs of coders in tickets closed — but when one ticket is “Refactor the CRM code,” and another is “Color the title bar in blue and orange,” they are not made equal. The team will undoubtedly get frustrated if their KPIs get ruined while working twice as hard to clear a massive task.
In such cases, you should look only at the Critical Success Factors since your Big Picture Goal is immeasurable. For example, with code, you might want to track:
- Code Review Coverage
- Percentage of Code Approved without Rework
- Defects per 1,000 Lines of Code (KLOC)
- The Number of Bugs Caught After Release
- Bug Recurrence Rate
- Unit Test Coverage
Together, these figures will give you a decent understanding of your team’s work — and if either metric starts to drop, it will be a good warning that something is wrong.
NOTE: If you still have trouble determining KPIs, request assistance from stakeholders, affected team leads, and employees. They might have ideas for Critical Success Factors that you have overlooked.
How to Turn Metrics Into KPIs
It’s not enough to just find the correct metrics to track. You also need to know which values you should be aiming for. In performance management, these values are called Benchmarks and Targets.
Benchmarks are what you are starting from, and the best way to find them is to gather the average of a given metric over the last 12 months. Provided that there haven’t been massive shake-ups, of course — for example, if your department doubled in size two months ago, the data from before is invalid.
Targets are the values you should be aiming for — and the trick here is that a Target should be realistic. It’s not an OKR that you might be able to do — it’s a solid base-level value that anyone should be able to achieve. For example, if current customer satisfaction is 80%, the target could be to increase it to 85% over the next year. However, setting the target to 95% would be extremely difficult to achieve and would demotivate people.
Still, even with a benchmark and a target, the metric does not become a KPI that easily. It needs an owner—a person responsible for hitting the metric. In personal KPIs, this is an employee. This accountability lies with the top manager in team- and department-level KPIs.
Here are some examples of properly formulated KPIs:
- Average Time to Resolution
- Benchmark: 4 hours
- Target: 3 hours
- Owner: Customer Support Manager
- Description: Measures the average time to resolve customer issues to improve customer satisfaction and reduce support backlog.
Monthly Sales Growth
- Benchmark: 5% month-over-month
- Target: 8% month-over-month
- Owner: Sales Director
- Description: Monitors monthly sales growth, encouraging sales teams to increase their outreach and improve conversions.
How to Set Up a KPI Framework
KPIs work best when the entire company management structure is built around them (and OKRs). So it’s not just about picking metrics and hitting numbers; it’s about creating a system that tracks those metrics, processes the data, and makes adjustments.
Sure, you can do this manually — however, the more people you employ, the more staggering the data will be. At some point, it becomes too much trouble for what it’s worth, and the whole system implodes… bringing everything back to the start, where nobody knows what everyone else is doing, and there is no trust.
To prevent that, you need a platform that will track KPIs unobtrusively, assembling data from the tools you already use — like Jira or Salesforce. And that’s precisely the kind of app that Oboard is building to supplement our world-class OKR App. So, if you want to start tracking KPIs at your company, reach out now and join our Early Bird Program!
Conclusion
KPIs are far more than numbers—they are a pulse check on your organization’s health, telling you where things are working and where improvement is needed. By thoughtfully selecting KPIs, setting realistic benchmarks and targets, and designating clear ownership, you can align every team’s efforts with the company’s strategic goals. KPIs empower employees to see the impact of their work, foster trust between teams and leadership, and drive continuous improvement across the business.
Performance management thrives when KPIs become part of a company’s culture. They encourage transparency, promote accountability, and provide a framework for everyone to understand and contribute to business success. But setting up KPIs isn’t a one-time task; they must be monitored, adjusted, and refined as your business evolves.
In the end, KPIs create a shared language for growth. They give every department—from customer support to engineering to sales—a way to communicate their achievements and identify improvement opportunities. By building a robust KPI framework, you’re not just managing performance but empowering your entire organization to reach new heights.
Ready to take your KPI tracking to the next level? Join Oboard’s Early Bird Program for exclusive access to our KPI App, designed to integrate seamlessly with your current tools and simplify performance management for every team.
