Learn how to create and track KPIs that actually improve business performance
Senior Content Marketing Specialist
May 29, 2025
•
6 Mins read
Tracking performance is necessary for business growth, but not every company succeeds at tracking it efficiently. A common challenge is that many companies track KPIs (Key Performance Indicators) that are vague, misaligned, or just plain irrelevant. This often results in teams reporting success on paper while the business itself struggles to grow.
In this article, I’ll walk you through some KPI foundations that will help you guide your performance tracking system and ensure that employee performance is clearly linked to business goals.
If you’d like a more in-depth course on building a performance system that works, Talstack’s course "Design and Implement High-Impact KPIs That Drive Results" by Dr. Johannes Flosbach is a must-watch.
KPIs are a set of measurable targets that show how effectively a person, team, or business is achieving its goals.
KPIs are an integral control mechanism that keeps your team focused on the work that drives results. The challenge many companies face is that they have KPIs that don’t control or focus their teams.
When KPIs are too many, too vague, or disconnected from strategy, they create noise, not clarity. But when they’re well-defined, they give every team member a clear path to contribution. Without meaningful KPIs, even your best talent can end up chasing irrelevant goals or duplicating effort.
"At one Nigerian bank with over 9,000 employees, each person had their own KPIs. In total, they were tracking 40,000+ separate indicators. Performance ratings were high, but the bank was still loss-making. We spent two years aligning KPIs to strategy. Only then did performance start to reflect reality." — Dr. Johannes Flosbach
Before we dive into setting up your KPIs, you need a clear understanding of the connection between your strategy, your structure, and your control mechanisms.
To put it simply:
Once your organization's strategy and structure are well-defined and clearly communicated, setting up control measures becomes easier.
It’s important to note, however, that even though KPIs are probably the most prominent control tool, they aren’t the only one. Other ways to monitor performance include budget tracking, internal audits, and process supervision.
For efficient corporate control, your KPIs need to be integrated into this broader control framework. This ensures consistency between what you set out to do and what your team is held accountable for.
To design strong KPIs, it's important to understand the following:
Apart from these basics, all KPIs should meet the SMART criteria: Specific, Measurable(Numerically measurable) , Achievable, Relevant, and Time-bound. This ensures clarity, focus, and accountability.
"If your company is making a loss, but everyone’s KPIs say they’re performing at 110%, your system is broken." — Dr. Johannes Flosbach
All KPIs fall under two categories — Leading and Lagging. Understanding this is instrumental to designing meaningful and actionable KPIs.
These KPIs measure effort and activity, simply put they measure your team’s input. Measuring input lets you keep an eye on what’s happening now, but it also helps you predict future results. Examples of leading KPIs include number of proposals sent, number of cold calls made, number Candidates interviewed etc.
Leading KPIs allow you to intervene early. They act like your vehicle’s dashboard, showing you what to correct before damage is done.
These KPIs measure output/results. They report on what has already happened. Examples of lagging KPIs include revenue generated, customer satisfaction score (CSAT), employee turnover rate etc
Lagging KPIs are your rearview mirror. They confirm whether your approach worked.
Many teams fall into the trap of leaning too heavily on just one type of KPI. When there’s too much focus on leading metrics, employees quickly learn how to game the system. If showing up early or making 20 cold calls each day guarantees a positive performance review, you’ll soon find that’s exactly what they’ll fixate on, regardless of whether those actions lead to actual business results. The effort is there, but the impact often isn’t.
On the other hand, an over-reliance on lagging metrics is equally problematic particularly because you don’t realize that you’re deviating from your route until you’re far along. If your sales team misses their quarterly target, you’ll only know at the end of the quarter, at which point you would have lost time, money, and momentum. Worse still, this kind of lagging-heavy setup often creates what I call an input disconnect. When you can’t see the actions that lead to your outcomes, it becomes difficult to know what to change or improve.
A healthy KPI system includes both leading and Lagging metrics. You should track what your employees are doing (leading) and what results those actions are producing (lagging). This balance gives you early visibility and post-performance clarity.
There are other ways to classify KPIs, but for the purpose of this article, we’ll stay focused on this foundational distinction.
Designing KPIs takes work, and the metrics you choose to track will always have a direct impact on how your company performs.
In this section, I’ll walk you through a simplified approach to designing effective KPIs that work across a range of scenarios.
Align – Every KPI must link back to a strategic objective. Remember, KPIs are part of your control system, they help keep your structure aligned with your strategy.
a common occurrence is that the further down the organizational chart you go, the harder it becomes for managers to decide what to measure. But here’s how I think about it: everything that anyone at your company does should connect to strategy in some way. Even something as simple as organizing “Denim Thursdays” can be tied to reducing employee turnover or improving employee morale.
Balance – Each employee’s KPIs should include both leading and lagging indicators. Ideally, lagging (output-based) KPIs should account for the majority of an individual’s metrics. This makes sure results are rewarded, and not just effort.
Brevity – Teams often track too many activities, and it quickly becomes overwhelming. Instead, focus on what matters most. As a personal rule of thumb, no individual should have more than 10 KPIs. Of course this won’t apply in every situation, but tracking too many metrics creates noise, not clarity.
Bundle – Employees on the same team should have similar-looking KPIs. Roles and responsibilities will differ, but the core metrics should overlap. This makes it easier to compare performance across the team. In practice, this can be hard to roll out, but it's worth aiming for as it creates alignment and simplifies evaluations.
Score – As discussed earlier, adopt a scoring system across your organization. Track KPI scores consistently and use them as a structured feedback tool.
A KPI is not just a metric. It’s a mirror. If your business is growing on paper but shrinking in profit, it’s time to take a hard look at what you’re measuring.
The right KPIs help your teams focus, align actions with strategy, and make informed decisions. The wrong KPIs just keep your people busy.
The Talstack’s course, "Design and Implement High-Impact KPIs That Drive Results," taught by Dr. Johannes Flosbach (General Manager at Cormart & Chi Farms), gives you a more in-depth understanding of performance tracking using KPIs.
