The crucial rules on how to appropriately set and use key performance indicators (KPIs). Follow KPI etiquette and be an effective manager.

What KPI etiquette is

KPI etiquette is the set of rules to appropriately and effectively set and use KPIs in the modern workplace. Such rules include:

  • How to set and use KPIs effectively.
  • The KPIs mistakes to avoid.

As a manager or employer, follow KPI etiquette rules to properly set KPIs in your team and ensure an effective performance culture.

As an employee, respect the KPI etiquette rules to correctly manage your tasks, learn on the job, and achieve your goals.

KPI etiquette rules

1) Know what a KPI is

A key performance indicator is a form of measurement. A KPI measures the success of a company, a product, or an initiative. 

KPIs answer the questions:

  • Why are we doing this initiative? What is the goal? 
  • How well are we doing? 

Each role, product, or initiative has its KPIs. A typical Sales KPI is the number of new customers signed in a month. The KPI for marathon runners is how much time they need to complete the marathon.

2) Understand why KPIs are important

KPIs are a powerful management tool. They help measure, make decisions, learn, and collaborate.

KPIs help teams stay focused. Thus, they increase productivity. Employees with a clear KPI will prioritize the tasks necessary to improve their KPI. Managers or teams with clear KPIs will correctly make decisions that optimize such indicators.

Furthermore, KPIs facilitate learning. If a team constantly measures its KPIs, it can learn what actions have a positive or negative impact on such KPIs. Thus, the team will be able to learn how to improve its performance.

Finally, KPIs improve collaboration too. A KPI is a powerful communication tool for the modern workplace. KPIs clarify what a manager, team, or company wants to achieve. On any occasion, it is much easier to collaborate with someone if we know what they need to achieve. Think about negotiating with clients or vendors, or collaborating with your coworkers.

3) Everyone should use KPIs

Every employee, manager, or team must have at least one clear key performance indicator. The KPI answers the question: why does this role, team, or project exist? 

Any role, project, team, or product without clear KPIs does not have a clear reason to exist. Thus, it is redundant.

4) Respect etiquette rules for applying KPIs

Every employee or manager should use KPIs to be productive. They will prioritize the activities that improve their KPIs. If an initiative does not improve any KPIs, it is redundant or not a priority. Thus, KPIs help employees understand whether a task or initiative is out of their scope, and limit duplication of effort in the organization. 

As an employee or a manager, you should communicate your KPIs. KPIs help other people understand your motives. It will be easier for coworkers or business partners to work with you.

As a manager, you should not use KPIs to control or micromanage your employees. Instead, use KPIs to empower your employees to learn faster and correctly make decisions with autonomy. When employees know their KPIs, they will prefer options that optimize for such indicators. Similarly, they will naturally learn to perform their jobs better to optimize their KPIs.

5) Understand which KPIs are right

The first step to adopting the KPIs system is to identify the right key performance indicators. For any role, product, task, project, or team, the right KPIs answer the following questions: 

  • Why do we need this role or project? 
  • What do we want to achieve? How do we quantify it?
  • What is the one number that will tell us if we did a good job?

After setting the right KPIs, you should define a goal. Based on what you know, how much can you improve your KPIs? For example: on average, it takes you 5 hours to complete a marathon. Can you do it in 4 hours?

6) Learn from KPIs

Managers must measure to learn and improve. If you or your team cannot reach a goal, ask why. Learning is as valuable as achieving the goal. The companies that perform best are the ones that learn the fastest.

Observe your KPI. Identify which factors can impact it, either positively or negatively. Then, adopt the practices that improve your KPI. Similarly, avoid the practices that make your KPI worse.

For example: observe when your marathon time gets worse. Did you do anything differently? For example, maybe you slept fewer hours. Or you trained differently. Identify which factor affected your performance. Then, adopt the appropriate corrective measures.

Be open to reviewing the validity of a KPI. One KPI may turn out to be not useful, or even harmful in guiding the performance of a manager or a team. It is a normal part of the learning process. In such cases, simply dismiss the flawed KPI and adopt a new one.

KPI etiquette: the worst mistakes

Avoid the worst KPI etiquette mistakes. 

  • 8/10. Not using KPIs.
  • 7/10. Using KPIs to micromanage employees.
  • 6/10. Sticking with a wrong KPI.

Resources

  • What are your KPIs really measuring: Harvard Business Review hbr.org