In brief
- KPIs (Key Performance Indicators) — key performance indicators: figures used to measure the extent to which an employee or company has achieved its targets over a specific period.
- ‘KPI’ and ‘KRI’ are the same term, written in Cyrillic.
- Index formula: (indicator weight × result) : target. The sum of the indices is the performance coefficient, on which your bonus depends.
- Below is a detailed calculation example with corrected arithmetic, as well as examples of KPIs for a sales manager, a marketer, a designer and a recruiter.
- The law does not contain the term ‘KPI’, but a performance-related bonus is considered additional pay. However, if you have fully met your work quota, you cannot be paid less than the minimum wage.
What are KPIs in simple terms
KPI — an abbreviation of the English Key Performance Indicators, which translates as ‘key performance indicators’. In simple terms, these are quantitative metrics used to measure the extent to which an employee or company has achieved a set target over a specific period.
The key word here is ‘quantitative’. KPIs are expressed in figures: total sales, number of new customers, percentage of approved designs. Metrics can be financial or non-financial, but in both cases they are measured over a specific period and compared against a target.
The concept has its roots in management: in the 1950s and 1960s, Peter Drucker’s ‘management by objectives’ (management by objectives) influenced the emergence of KPIs as a way of measuring results against pre-set targets. Drucker himself did not coin the term ‘KPI’, but the logic of ‘first the target, then the indicator’ stems precisely from that approach.
For you as an employee, KPIs are the answer to the question of exactly what you are being paid a bonus for. If the word ‘KPI’ appears in a job advertisement or contract, ask for a list of indicators, their weightings and a plan before agreeing to the offer.
KPI, KRI and KPI are one and the same
In Ukrainian, the abbreviation is often written in Cyrillic: ‘КПІ’ or ‘КРІ’. This is not a different term, but the same letters K, P, I, typed using the Ukrainian keyboard layout. All three variants appear in search results and job advertisements.
A real-life example — the ‘Sales Manager’ vacancy at Comfort House: the salary description states ‘$750–1,789, KRI’. This means that part of your pay will depend directly on your performance against key performance indicators.
How KPIs are calculated: the index formula
There is no single mandatory KPI formula: the law does not stipulate one, so each company sets its own rules. The most common method, as outlined by HR services, consists of three steps:
Assigning weights. Each indicator is assigned a weighting based on its level of importance. The sum of the weights of all indicators must equal 1.
Recording targets and actual results. A target is set for each indicator, and the actual result is recorded at the end of the period.
Calculating the index. The index for each indicator is calculated and the results are added together.
Calculating the index:
Multiply the indicator’s weight by the actual result and divide by the target.
(Indicator weight × Result) : Target
The sum of all indices is called the performance coefficient. It is this that determines whether you will receive a bonus and, if so, how much.
| Performance coefficient | What it means | What it means for the bonus |
|---|---|---|
| Equals 1 | Target met | Full bonus |
| Greater than 1 | Target exceeded | Additional bonuses may be available |
| Less than 1 | Target not met | Bonus reduced or not paid |
It is up to the employer to decide exactly how the coefficient is converted into money — whether proportionally, in stages or on an ‘all or nothing’ basis. Look for this rule in the bonus policy or in the collective agreement.
An example of a KPI calculation with correct arithmetic
This example is taken from the HR blog happymonday.ua: an employee is responsible for three sales indicators relating to a job search website.
| Metric | Weight | Target | Actual | Index |
|---|---|---|---|---|
| Purchases of ‘Profkar’iera’ tests | 0.5 | 50 | 35 | 0.35 |
| Purchases of the ‘CV’ service | 0.25 | 40 | 10 | 0.0625 |
| Job postings | 0.25 | 200 | 300 | 0.375 |
| Effectiveness coefficient | 1 | 0.7875 |
How each row was calculated:
First row: 0.5 × 35 : 50 = 0.35
Second row: 0.25 × 10 : 40 = 0.0625
Third row: 0.25 × 300 : 200 = 0.375
Total: 0.35 + 0.0625 + 0.375 = 0.7875
In the original source, the coefficient was rounded and recorded as ‘0.7’, although the exact sum of the indices is 0.7875. For a bonus, this is no small matter: if it is calculated in proportion to the coefficient, rounding down takes away some of your money. Always recalculate your KPI yourself.
What this example shows: the coefficient is less than 1 because two indicators were not met — the first, the most significant (0.35 instead of 0.5), and the second (0.0625 instead of 0.25). Together, they resulted in a deduction of 0.3375 from the weighting, whilst exceeding the third target added only 0.125 (0.375 instead of 0.25), which was not enough to offset this deduction.
How to calculate your KPI yourself
- Check your weight. Extract all your performance indicators and the weighting for each one from the bonus policy. Check that the sum of the weights equals 1. If this is not the case, ask for clarification, otherwise the calculation will be skewed.
- Collect the data. For each indicator, record the target for the period and the actual result from the data source specified in the rules (CRM, accounts report, accounting system).
- Calculate the indices. Multiply the weighting by the actual figure and divide by the target for each item.
- Sum up. Add up all the indices. Compare the total with one and with your company’s bonus payment policy.
- Compare the calculations. If your result does not match your employer’s calculation, ask to see the source data and the calculation method.
- Be aware of two pitfalls:
- Rounding: the difference between 0.7875 and 0.7 in the example above has a significant impact on the payment amount.
- Over-performance: In this formula, an over-achievement increases the index, but whether the company caps the maximum multiplier depends entirely on its internal rules.
When you are offered a KPI system, look first and foremost at the metric with the highest weighting — the lion’s share of your bonus depends on it.
Examples of KPIs for different roles
The set of metrics depends on your role within the company. Below are typical KPIs that the HR service hr.smart-it.com offers for four professions:
| Profession | Typical KPIs |
|---|---|
| Sales Manager | Sales volume for the period, number of new customers, lead-to-customer conversion rate, average transaction value |
| Marketer, SMM | CTR (ad click-through rate), LTV (lifetime value), ROI (return on investment in campaigns), number of leads generated |
| Designer | Number of completed projects, time spent per task, percentage of projects approved on first submission |
| Recruiter | Average time to fill a vacancy — TTH (Time to Hire) |
Sales KPIs
Sales volume shows the total amount for the period; conversion rate — the percentage of leads who became buyers, whilst the average spend is the average revenue per customer. During the interview, be sure to clarify which of these metrics are included in your bonus and their respective weightings.
The CRM service keepincrm.com provides the following formulas for calculating key metrics:
Sales conversion rate (CR): Number of sales : Number of visitors × 100%
Average transaction value: Revenue for the period : Number of transactions for the same period
Repeat purchases (RPR): Customers who have made more than one purchase : Total number of customers × 100%
ROI (Return on Investment): (Revenue − Costs) : Costs × 100%
If you are being assessed on conversion rates, find out exactly what is being used as the denominator — all visitors, all leads, or only those with whom you have communicated directly. The final percentage depends significantly on this.
Marketing KPIs
Marketing metrics (CTR, LTV, ROI) often depend not only on your work, but also on the budget and the quality of the product itself. If your bonus is tied to ROI, clarify exactly who makes the decisions regarding the size of the advertising budget.
KPIs in design and recruitment
Here, KPIs are measured in terms of projects and time: how many tasks have been completed, how many were approved on the first attempt, and how quickly a vacancy was filled. Bear in mind that the ‘on first submission’ metric also depends on the clarity of the technical specifications (TS), so it’s worth discussing this before work begins.
Accountants, logistics specialists and other professions
It is not only sales or marketing specialists who work with KPIs. The blog happymonday.ua also includes accountants, financiers, HR professionals, social media managers, targeting specialists, SEO specialists, PR professionals and logistics specialists. If there are no ready-made standard metrics for your role available in open sources, ask your employer for a detailed list of KPIs and check it against the SMART criteria.
What types of KPIs are there?
| Classification criteria | Types | Examples |
|---|---|---|
| Level | Strategic, operational | The company’s progress towards long-term goals; efficiency of day-to-day processes |
| Object | Financial, marketing, HR | ROI, ROE; CAC, LTV, CTR; TTH, staff turnover |
| Form of expression | Absolute, relative | Specific figure (number of customers); proportion or percentage (conversion rate) |
| Nature of the metric | Financial, non-financial | Sales revenue; time taken to fill a vacancy |
| Type by purpose | Outcomes, productivity, performance, efficiency | What has been achieved; how much time was spent; whether actions meet standards; whether costs are justified |
Classification by purpose answers the question of exactly what the indicator measures. The HR service hurma.work and the blog happymonday.ua identify five main types:
Outcome KPIs — show exactly what has been achieved.
Productivity KPIs — how much time and effort was spent on it.
Operational KPIs — the extent to which actions meet established standards.
Efficiency KPIs — whether the funds spent were well spent.
Cost KPIs — how many resources were used to achieve the result.
This breakdown is useful for you as a check: if all your KPIs fall solely under the outcome category (for example, sales volume only), your bonus will depend exclusively on the final figure. If, however, there are productivity or operational indicators, part of the bonus can be earned through the quality and speed of work, even when the overall market is in decline.
How do KPIs differ from OKRs
| What are we comparing | KPIs | OKRs |
|---|---|---|
| What it measures | Current processes and productivity | Progress towards ambitious strategic goals |
| Format | A quantitative metric with a target for a specific period | A goal plus key results |
| For an employee | Often linked to a bonus via a formula | Sets the direction of work |
OKR are ambitious goals for the entire company or team. KPIs measure the consistency and effectiveness of day-to-day work. If both systems are mentioned in the job description, be sure to clarify which one your pay depends on.
How many KPIs are too many?
More metrics do not mean a more accurate assessment. David Parmenter, an expert and author of books on KPIs, advises following the 10/80/10 rule:
- around 10 key performance indicators,
- up to 80 outcome and efficiency metrics,
- 10 KPIs for the entire organisation.
According to him, a larger number is rarely needed, and when there are more than 150 metrics, the system stops working (FM Magazine).
An important clarification regarding CAC:
Sources sometimes provide different interpretations of CAC: as ‘lead acquisition cost’ or ‘customer acquisition cost’. The official definition Customer Acquisition Cost confirms the second option — it is indeed customer acquisition cost. If CAC is one of your KPIs, check exactly who is included in the calculations, as leads and customers yield completely different figures.
Conclusion for employees: if your bonus depends on a long list of metrics, the weight of each one becomes negligible, and you lose focus. The optimal benchmark for one person is no more than 3–4 targets per month.
How KPIs are set: the SMART principle
Any objective from which a KPI is derived is structured according to the international SMART principle. It must meet five criteria:
S (Specific) — Specific: it is clear exactly what is being measured (for example, ‘new customers’, rather than general ‘activity’).
M (Measurable) — Measurable: there is a clear target figure and a data source to back it up.
A (Achievable) — Achievable: the target is realistic given your workload.
R (Relevant) — Relevant: the metric depends directly on your work, rather than on decisions made by other departments.
T (Time-bound) — Time-bound: the timeframe (month, quarter, year) is clearly specified.
Targets are set for a specific timeframe. They should be ambitious, but achievable. Take a look at the examples from happymonday.ua:
| A poorly formulated target | Why it’s poor |
|---|---|
| Increase sales by 100 per cent within two months | An unrealistic plan for such a timeframe |
| Improve the quality of the product or service | No specific figure or timeframe |
| Reduce costs | No specific figure or timeframe |
The implementation of KPIs in a company usually involves the following steps: defining strategic objectives → identifying success factors → selecting KPIs → setting target values → monitoring and reporting → analysis and adjustment. The final step is also important for you: target figures for the next period may be revised, so the successes of the previous quarter do not guarantee that the same conditions will automatically be maintained.
When KPIs don’t work
A KPI system does not always motivate — if approached incorrectly, it can demotivate. The main reasons why KPIs stop working:
Overly ambitious targets that seem unrealistic;
Assessing creative or innovative work, where complex tasks are difficult to reduce to mere figures;
A lack of resources or understanding of exactly how to achieve the set targets;
An overly complicated calculation method that employees cannot figure out on their own;
A lack of connection between the company’s goals and the employee’s personal KPIs.
To check your KPIs, answer three questions:
Do I personally have any influence over this metric?
Is it possible to ‘hack’ this KPI (i.e. meet the target on paper, but compromise on quality)?
Does this system cause constant stress rather than excitement?
Lagging and leading indicators
A sales plan is a lagging indicator: you only find out whether you’ve met it at the end of the month. To avoid unpleasant surprises, it’s worth breaking the plan down into leading indicators that are easy to track on a daily basis (for example, the number of calls or presentations given). This allows you to spot risks in advance and make timely adjustments to your work.
KPIs and your salary: what the law says
No Ukrainian legislation contains the term ‘KPI’. However, the law clearly regulates the payment of bonuses and protects employees’ rights.
A KPI bonus is additional pay
According to Article 97 of the Labour Code, remuneration is paid on an hourly, piecework or other basis. Article 94 of the Labour Code links the amount of salary to work performance, whilst Article 143 provides for incentives for success at work.
In accordance with Article 2 of the Law of Ukraine ‘On Remuneration of Labour’, bonuses for the fulfilment of production targets constitute additional remuneration (as opposed to the basic salary). The amounts of such bonuses are set out in the collective agreement or by agreement with the trade union (Article 15 of the ‘Law on Remuneration’, Article 97 of the Labour Code).
Unmet KPIs and the minimum wage
Under Article 3-1 of the ‘On Remuneration’, an employee’s pay for a fully completed monthly (or hourly) work quota may not be lower than the minimum wage.
What this means in practice:
Your basic salary and your KPI bonus are separate components of your income. If you receive a performance coefficient below 1, you lose part or all of your bonus, but your basic salary for time worked in full is protected by law. An employer is not entitled to reduce your basic salary below the minimum due to unmet KPIs (except in cases where production quotas are not met through the employee’s own fault, as per Article 21 of the Law ‘On Remuneration’).
Who sets the bonus rules
The employer is not entitled to unilaterally change the amounts or conditions of bonus payments. All rules must be set out in the company’s internal documents. Look for answers in three sources:
The collective agreement;
The bonus policy;
Internal labour regulations.
Changes to the KPI system
Any change to remuneration systems or rates is considered a change to essential terms and conditions of employment. Usually (Article 32(3) of the Labour Code), employees must be notified of such changes no later than two months in advance.
During the period of martial law, the requirement for two months’ notice does not apply (in accordance with Law of Ukraine No. 2136-IX of 15 March 2022). Therefore, an employer may update the KPI system sooner, but the new rules must still be formally enshrined in the Bonus Regulations.
KPI-based vacancies on Injobe
There are 13 active vacancies in sales and marketing on Injobe — predominantly for ‘sales managers’. The median salary range is from $700 to $1,789. In many of these roles, remuneration consists of a salary and performance-related bonuses — effectively based on KPIs.
The company ‘Sales Bureau’ currently has the most such vacancies. Vacancies for marketers can be found under the heading ‘Marketing, Advertising’; for other roles, please search the general job catalogue.
What to check if a job advert includes KPIs
Before agreeing to KPI-based pay, clarify a few things and, if possible, get them in writing.
- The list of metrics, the weighting of each, and the plan for the period.
- How the performance coefficient is converted into a bonus amount.
- What salary is guaranteed regardless of KPIs.
- Where are the rules set out — in the collective agreement or the bonus policy.
- Who calculates the figures and on what data.
- Do the metrics depend on you, or on the budget, the product, or the work of other departments.
- How often is the plan reviewed, and are you given advance notice.
- Are there any collective metrics, i.e. those dependent on the performance of the whole team or department?
- Are there any interim or leading indicators that can be monitored throughout the period?
