When a company is just starting out, the owner keeps a close eye on everything: they see every customer, know about every issue, and understand what works and what doesn’t. But as the business grows, this direct visibility disappears. The team expands, processes multiply, and suddenly it becomes clear that intuitive understanding is no longer enough. That’s when the need for objective evaluation tools arises: key performance indicators (KPIs).

In this article, we will explore what KPIs are and how to use them to manage a business. If you work in customer support through chats, be sure to check out the material on KPI in chats — it details specific indicators for your field.

What are KPIs and why they are more than just numbers

Key performance indicators are measurable benchmarks that show how effectively teams, processes, or individual employees are performing relative to set goals. Unlike arbitrary metrics that simply record facts, KPIs always have a managerial context and help make informed decisions.

A well-designed indicator always meets three criteria:

• Clear definition of the measurement object: it is clear what is being evaluated and why it is important
• Presence of a baseline and a target value: there is something to compare current results with
• Ability to influence the indicator: the team can take specific actions to improve it

KPIs, metrics, and goals: the key difference

These concepts are often confused, although they serve different functions in management.

A goal describes the desired state. For example: “improve customer service quality.” It defines the direction but does not provide specific benchmarks to assess progress.

A metric records a measurable parameter. For example, the number of requests per day or the average duration of a conversation. It is a fact that does not, by itself, indicate success or failure; it simply states the current situation.

A KPI shows progress toward a goal and allows you to assess effectiveness. If the goal is to improve service quality, a KPI could be the “percentage of requests resolved on the first contact.” This indicator directly reflects work quality and allows tracking changes over time.

Main types of performance indicators

For an objective assessment, a balanced system of indicators is needed. Usually, four categories of KPIs are used, which complement each other.

Result KPIs (What was achieved?)

These indicators answer questions about the final outcome:

• achievement of planned targets
• reaching target values
• volume of completed tasks

Result KPIs are important for evaluating outcomes, but they do not explain the reasons for success or failure.

Process KPIs (How did the work proceed?)

Process indicators reveal the mechanics behind the results:

• duration of individual stages
• stability of the workflow
• number of deviations from standard procedures

These indicators help identify growth points and understand which changes will have the greatest effect.

Quality KPIs (Did we sacrifice quality for speed?)

Quality indicators prevent the classic “faster but worse” trap:

• error rate
• frequency of repeat customer requests
• compliance with established standards

Without quality control, a team may demonstrate impressive processing speed but low real effectiveness in solving customer problems.

Development KPIs (Are we moving forward?)

These indicators show improvement dynamics over time:

• productivity growth
• reduction in task completion time
• reduction in performance variability among employees

Development KPIs are especially valuable for long-term planning and assessing the effectiveness of implemented changes.

How to build KPIs correctly: a step-by-step method

Building an effective system of indicators is a sequential process that begins with a deep understanding of business goals.

Step 1. Formulate a specific, measurable goal
Instead of the vague “increase team efficiency,” you need a clear formulation:
“Reduce the average request handling time from 8 to 5 minutes within the next quarter.”
Such a goal contains all necessary elements: specificity, measurability, time frame, and realism.

Step 2. Choose an indicator that directly reflects the goal
The indicator must be directly related to the objective. If the goal is to reduce handling time, measure the average handling time — not the number of processed requests or operator workload.

Step 3. Fix the current level as a baseline
Without a starting point, it is impossible to assess progress correctly. If the current average handling time is 8 minutes, that becomes your baseline for comparison. It is important to record not only the value itself but also the measurement conditions.

Step 4. Set a realistic target value
The target should motivate improvement but remain achievable. If the current result is 8 minutes, setting a target of 2 minutes may be demotivating for the team.

Step 5. Determine the optimal measurement frequency
The monitoring frequency depends on how fast the process changes. For some indicators, monthly analysis is sufficient; for others, daily evaluation is critical. The main thing is to ensure regularity to enable accurate comparisons.

KPI Calculation Formulas: Practical Examples

There are several basic approaches to calculating performance indicators that are used in most businesses.

Classic formula for plan fulfillment

KPI (%) = (Actual value / Planned value) × 100

Example: if the plan was to handle 200 requests, and 180 were actually handled, then the plan fulfillment KPI is:

(180 / 200) × 100 = 90%

A value below 100% signals underperformance, while above 100% indicates overachievement.

Formula for change dynamics

KPI (%) = ((Current value – Baseline value) / Baseline value) × 100

Example: if the baseline handling time was 8 minutes, and now it is 6 minutes, then the improvement is:

((6 – 8) / 8) × 100 = -25%

A negative value in this case indicates positive dynamics, since the time has decreased.

Composite indicator for comprehensive evaluation

In more complex systems, several KPIs are combined into a single index, taking into account the different weight of each indicator:

Composite KPI = (KPI₁ × weight₁) + (KPI₂ × weight₂) + … + (KPIₙ × weightₙ)

This allows you to account for the fact that different aspects of work have different importance in achieving the final goal.

Common Mistakes When Implementing KPIs

Even knowing the theory, it is easy to make mistakes in practice that undermine the entire KPI system. Let’s look at the most common errors.

Too many indicators at once

Imagine trying to monitor 20 different numbers every day. What happens? You get overwhelmed, and it becomes unclear what really matters. The team tries to improve everything at once and ends up with mediocre results across the board.

Solution: choose 3–5 indicators that are truly critical right now. The rest can wait.

Indicators that cannot be influenced

This is like evaluating a salesperson based on the weather outside. It may be formally possible, but practically absurd.

Real-life example: support agents are evaluated based on the number of incoming requests. But they do not control the advertising that generates those requests. Result? People feel powerless instead of motivated.

Rule: if the team cannot change the indicator through their actions, it is a bad KPI.

No reference point for comparison

“We have 95% satisfied customers” — is that good or bad? Without context, it is unclear. Maybe it was 98% last month, which would mean a decline. Or it was 85%, and you made a breakthrough.

Always record a baseline; otherwise, you will be navigating in the dark.

Changing calculation rules mid-course

Initially you counted only working hours, and then you decided to include weekends. It seems like a minor detail, but now it is impossible to understand whether the results improved or the methodology changed.

If you change the rules, it is worth recalculating past data or starting a new baseline.

Chasing one indicator destroys others

This is the most common trap. If a support team is tasked with “respond faster,” what happens? Agents respond lightning-fast but superficially. Customer issues are not resolved, people write again, and in the end everyone is dissatisfied.

That is why a balanced system is needed: speed + quality + customer satisfaction. One without the others does not work.

KPI as a Dynamic Management System

Effective indicators require regular review and adaptation to changes in the business.

When to revise the KPI system

There are several clear signals that it is time to update your indicators:

• company strategic goals have changed
• processes have significantly transformed due to new technologies
• all target values have been achieved and new challenges are needed
• the indicator is recorded but no longer influences managerial decisions
• the market situation has changed so much that old benchmarks have lost relevance

How to Use KPIs for Team Development

Properly configured indicators create a culture of continuous improvement. The team sees objective progress, clearly understands weak points, and can independently propose initiatives for improvement. The key principle: KPIs should be used for development and learning, not for punishment for “bad numbers.” When indicators become a tool of pressure, the team starts manipulating data instead of genuinely improving work.

The Role of Data and Analytics in the KPI System

Without quality data, even perfectly designed indicators lose practical value. An effective measurement system requires:

• Unified standards for event recording: all participants understand exactly what and how is being counted
• Transparent and understandable calculation formulas: every employee can independently verify where a specific value came from
• Availability of historical data: the ability to analyze trends over different periods

NovaTalks provides tools for automated collection and analysis of performance indicators. This allows managers to focus on interpreting data and making decisions, rather than spending time on routine data collection from different sources.

Frequently Asked Questions About KPIs

Can the same KPIs work for different companies?
The methodology for building KPIs is universal, but the specific indicators are always individual. Even similar businesses operate under different conditions, have different goals, processes, and growth points. What is critical for one company may be secondary for another. It is important to adapt indicators to the specifics of your own business.

How many indicators is optimal to track at the same time?
For one management level, 3–5 key indicators are sufficient. A larger number complicates focus and reduces decision-making effectiveness. If you need to monitor more aspects of activity, it is better to structure indicators by management levels or separate work areas.

How can you tell if the right KPIs are chosen?
A correct indicator directly influences managerial decisions and process changes. A simple test: if, after seeing the KPI value, you understand what specific actions need to be taken, the indicator is chosen correctly. If the indicator is only recorded in reports but does not lead to decisions, its value is questionable.

How often should the KPI system be reviewed?
The frequency of review depends on the dynamics of the business environment. In stable conditions, a quarterly or semi-annual analysis of the relevance of indicators is sufficient. In fast-changing industries, a monthly evaluation may be required. The main thing is not to let indicators become outdated and lose their connection to real business goals.

What is the fundamental difference between KPI and OKR?
OKR (Objectives and Key Results) sets the direction of development and ambitious goals, often with deliberately high expectations. KPIs record current efficiency and stability of operational processes. OKRs answer the question “where are we heading and what do we want to achieve?”, while KPIs answer “how effectively are we working right now?”. These approaches complement each other within a comprehensive management system.

Is it possible to evaluate performance using only one indicator?
Theoretically, it is possible, but practically it almost always leads to a distorted picture of reality. One indicator oversimplifies a multifaceted reality, leading to a loss of important context. For an objective assessment, a combination of result, process, and quality indicators is usually needed to balance each other.

Practical Application of KPIs in Business

Theoretical knowledge gains value only when applied correctly in practice. Key performance indicators work best when:

• they are integrated into daily workflows
• the team deeply understands the logic of the indicators and sees a direct connection to business goals
• the system allows for quick identification of deviations and prompt response
• the company has developed a culture of data-driven decision-making

Conclusions

The success of a KPI system depends less on the complexity of formulas and more on a deep understanding of the business context in which the indicators operate. Properly designed KPIs answer critically important questions: are we moving in the right direction, at a sufficient pace, and are we not sacrificing quality on the way to quantitative results?

NovaTalks offers comprehensive analytics tools that allow you to build an integrated system of performance indicators with the ability to track cause-and-effect relationships in real time. Submit a request for a trial period to personally evaluate the platform’s capabilities for optimizing the management of your business.