Many companies run a yearly appraisal based on the manager's impression, so employees see the result as unfair and management cannot use it for promotion and training decisions. Key performance indicators (KPIs) base appraisal on goals agreed in advance and on data you can check. This article explains how to build a KPI system in practice and what the software that runs it should provide.
What are KPIs?
A KPI is a predefined measure that shows whether an employee or team reached a goal within a set period. They usually fall into three types:
- Quantitative: orders completed, sales value, on-time delivery.
- Qualitative: quality of work, internal and external customer satisfaction.
- Behavioural: collaboration, discipline, professional growth, measured against a clear description of expected behaviour.
Steps to build a KPI system
1. Start from company goals
Write three to five company goals for the year, then ask each department what it contributes to each one. Department KPIs, then individual KPIs, follow from there. A KPI that does not link to a higher goal is rarely worth tracking.
2. Write KPIs the SMART way
Specific, measurable, achievable, relevant, time-bound. A hypothetical example: "respond to customer requests within one working day this quarter" instead of "improve customer service".
3. Set weights
Not every KPI matters equally. Give each a weight out of 100 and keep the number per employee small so focus stays clear.
4. Define a data source for each KPI
Does the number come from the sales system, the helpdesk, or the manager's review? A KPI without a reliable data source turns into opinion.
5. Choose the review cycle
A yearly review alone finds problems too late. A short quarterly check-in plus a full yearly review lets people correct course during the year.
6. Add multiple viewpoints where useful
360-degree feedback gathers input from manager, peers and reports, and is useful for leadership and collaborative roles. It needs clear questions and suitable confidentiality, or it becomes either flattery or score-settling.
Sample scorecard
| KPI | Type | Weight | Data source |
|---|---|---|---|
| Orders completed on time | Quantitative | 40 | Order system |
| Output quality | Qualitative | 30 | Manager review against written criteria |
| Team collaboration | Behavioural | 15 | Peer feedback |
| Development plan completed | Development | 15 | Training record |
The KPIs and weights are illustrative only; each role needs its own.
Linking results to decisions
An appraisal that changes nothing quickly loses value. Decide in advance how results are used:
- Bonuses and raises under rules published to all staff.
- Promotions based on repeated performance, not a single cycle.
- Development and training plans for anyone who needs support in a skill.
- Documented follow-up for persistent under-performance, with a clear chance to improve.
What the software should provide
- Different review templates per department or job title.
- Pulling numbers from other systems instead of typing them where possible.
- Reminders to managers and employees about review dates.
- Employee self-assessment before the manager's review, with room to comment or object.
- An archive of every past review per employee.
- Dashboards showing score distribution by department, to spot lenient or harsh rating.
Common mistakes
- So many KPIs that nobody remembers them.
- KPIs the employee measures alone without review.
- Changing goals mid-cycle without recording it.
- Giving almost everyone the same score, which makes the review meaningless.
Where to run appraisals
Odoo has an Appraisals app linked to employee data; see Odoo for HR. If your KPIs depend on data from specialised operational systems, a custom KPI dashboard may be the answer; see custom systems. You can also request a demo of Maham HR, a Maham Pro product under development, to see what it covers.
FAQ
How many KPIs per employee?
There is no fixed number, but a few clear ones beat a long list. Start small and test for one cycle.
Should we roll out company-wide at once?
Better to start with one or two departments that have clear data, such as sales or customer service, then expand after the first cycle.
Next step
To discuss building scorecards and where to run them, book a free 30-minute introductory session. For the wider picture, read how to choose an HR system.