Most growing companies aren’t short of hard-working people. And for a while, the team is small enough that everyone has a sense of who’s doing what, and who’s doing it well.
Then the company grows, roles evolve and overlap, and performance tracking becomes less intuitive.
That’s usually when KPIs become more important. Used well, they define each role and keep everyone focusing on their roles. Used flippantly, they become targets people either ignore or get very good at gaming.
In the words of Goodhart’s law, “When a measure becomes a target, it ceases to be a good measure”.
Read on to learn how to set strong, realistic KPIs that benefit your business and your team.
KPIs connect effort to results so there’s a clear cause-and-effect between people’s inputs and outputs. They also help set expectations so an employee’s effort is visible.
Over 40% of UK employees say they have no clear expectations attached to their role, according to the CIPD's UK Working Lives survey. Roles with KPIs were associated with better performance, job satisfaction, and physical and mental health than those without.
The flip side is that badly chosen KPIs can actively warp behaviour, resulting in:
Narrowed focus: People neglect everything not covered by the KPI, even if it matters to the business.
Reduced intrinsic motivation: The measure can crowd out the professional pride involved in doing a great job.
Cultural erosion: Individual targets can encourage people to optimise for themselves rather than the team.
The obvious temptation is to start with a list of things you can measure. Avoid that and instead, start with the role.
Ask what would be noticeably better in the business if this person did an excellent job. Faster delivery? Better-qualified sales opportunities? Fewer errors? Stronger retention? More reliable forecasting?
A good KPI for any of those goals usually lies somewhere between the person’s day-to-day activity and the company’s results.
Too granular and the KPI becomes disconnected from the bigger picture – consider something like ‘calls made’ that doesn’t show anything about the quality of the interactions.
Too macro, and the target becomes disconnected from the person’s influence – consider something like company revenue or profitability.
The useful middle ground is an outcome they can materially affect through the decisions they make in the role.
Three KPIs is usually plenty. Narrowing them down forces you to decide what really defines great performance in a role. This also gives you enough room to avoid judging somebody on a single number.
For the examples below, we compared guidance from Harvard Business School, the CIPD, Gallup, and other business sources, then selected measures that make sense for growing companies.
None of this is 'one-size-fits-all', but it should give you some idea of where to start.
| ROLE | KPI 1 | KPI 2 | KPI 3 |
| Sales Manager | Revenue won – value of new business secured by the team | Win rate – % of qualified opportunities that become customers | Pipeline coverage – qualified pipeline relative to the sales target |
| Operations Manager | On-time delivery rate – % completed by the agreed date | Rework rate – % requiring correction or repetition | Cost per delivery/unit – direct cost of producing the work |
| Marketing Manager | Qualified pipeline generated – value of sales opportunities attributed to marketing | Cost per qualified opportunity – marketing spend required to generate one | Lead-to-opportunity conversion – % of leads that meet agreed qualification criteria |
| Finance Lead | Gross margin – revenue left after direct delivery costs | Debtor days – average time taken to collect invoiced revenue | Financial accuracy – difference between forecast vs actual cash position |
| People Lead | Voluntary turnover – % of employees who choose to leave | Time to hire – average time required to fill a vacancy | New-staff retention – % of new hires retained beyond an agreed period |
| Customer Support Lead | Customer satisfaction – customer rating following support |
Resolution rate – % of cases resolved successfully |
Repeat contact rate – % requiring further contact about the same issue |
As a founder, you’ll eventually need to make others accountable for the business.
This is a big step, and it’s common to give someone responsibility without giving them full control over the results. Suppose a sales lead is made responsible for increasing sales volume, but you, the founder, still close and approve deals.
Essentially in this situation, the KPI is owned by two people. That’s going to get frustrating for a committed team member who wants to move the dial but can’t, because they might perceive you as blocking them.
When you assign KPIs across your founding team or leadership team, be explicit about:
The fundamental principle is that if someone has a KPI, they need control over the tools that drive it.
When you grant options through an EMI scheme, growth shares, CSOP, or unapproved options, you can attach performance-based vesting conditions.
Equity vests only once the recipient meets specific milestones, and you can align those milestones with the KPIs they’re responsible for.
Some common examples include:
A sales director whose options vest when the agreed revenue or new-business target is achieved over the performance period.
An operations lead whose shares vest when an agreed cost-reduction or gross-margin target is sustained over the measurement period.
A marketing manager whose equity vests when the agreed number of qualified referrals is generated by the target date.
These are all structures regularly designed on the Vestd platform.
Our Workplace Values Survey found that 60% of UK employees say a share scheme would motivate them, though 40% don't fully understand what one involves.
Defined KPIs clarify what you're asking of someone and make the reward for delivering it genuinely meaningful!
Once you’ve decided who owns the important outcomes in your business, you can decide how to reward that responsibility.
Equity can give key people a direct stake in the value they help create, particularly where their contribution is tied to long-term growth.
Vestd helps you structure that properly, from designing the scheme and setting conditions to managing your cap table and keeping everything compliant.
If you’re considering equity for the people taking on more responsibility in your business, you can book a free, no-obligation consultation with our team.