A Guide to Developing KPIs for Direct & Indirect Reports

In the cascading waterfall of management, developing KPIs with realistic, business-focused outcomes are crucial for org-wide effective leadership goals.

Aligning KPIs with both direct and indirect reports is a critical aspect of effective management. Yet, as digital transformation continues to move at lighting speed, many leaders are stuck in traditional metrics that may not accurately reflect an employee’s contribution or potential. 

Many leaders are still clinging to traditional metrics that no longer accurately capture an employee’s contribution or potential. Embracing the potential for change by reevaluating your KPIs can lead to transformative outcomes. Here are some strategies tailored to revamping your KPIs to better gauge the performance of both direct and indirect reports, recognizing the varied nature of their roles and levels of interaction within your managerial framework.

Highly individualized KPIs for direct reports  

For direct reports, developing KPIs should focus on individual performance metrics related to specific roles, projects, and day-to-day tasks. The direct line communication between managers and direct reports also opens up possibilities for personality and career qualitative KPIs – like developing leadership skills, problem-solving strategies, or facilitating teamwork. 

• Completion Rate of Assigned Tasks: This measures the percentage of tasks that an employee completes within a given timeframe. It provides a straightforward look at an individual’s productivity and efficiency. 
• Sales Conversion Rate: For sales-oriented roles, this tracks the number of successful conversions relative to the number of leads or opportunities. It’s a valuable indicator of an individual’s sales skills and effectiveness. 
• Customer Satisfaction Score: Particularly relevant for customer-facing roles, this KPI measures the level of satisfaction customers have with an employee’s service. It can highlight an individual’s ability to meet and exceed expectations. 
• Team Collaboration Rating: This qualitative KPI assesses any employee’s ability to work effectively within a team. It can be measured through peer reviews or feedback surveys, providing insights into an individual’s teamwork skills and their contribution to a team. 

Developing departmental KPIs for indirect reports 

For CTOs, the direct ratio of direct: indirect reports is anywhere from 1:4 to 1:10, depending on org. Despite your level of removal and lack of visibility, developing KPIs that showcase outstanding performance and alert you to failures, is crucial.

Their direct managers will develop direct KPIs for their day-to-day, so your personal KPIs for measuring their performance might be less detailed and more focused on team or department-level outcomes. Because of the distance in the organizational hierarchy, gathering feedback from their direct managers can also be a valuable tool in assessing the performance of indirect report. 

Here are a few KPIs to consider if you want to measure the effectiveness of your indirect reports: 

• Departmental goal completion rate: This tracks the percentage of departmental goals achieved within a set period. It provides a measure of the team’s ability to meet strategic objectives and contribute to broader organizational goals. 
• Inter-departmental collaboration score: This qualitative KPI assesses the effectiveness of collaboration between different departments. It can be measured through feedback surveys or project outcomes, providing insights into the team’s ability to work cross-functionally. 
• Project delivery timeliness: This measures the number of projects delivered on time by the team or department. It provides insights into the team’s project management skills. 

Understanding your comfort zone to embrace the greater potential 

Reflect on your comfort level with change regarding KPIs. Are you a leader who embraces innovative thinking and new methodologies, or do you find comfort in battle-tested KPIs?

The key to successfully navigating a KPI transition is by taking calculated, incremental steps. If you have solid KPIs for direct and indirect reports – great. If you find yourself needing improvements, start small. Select a specific team or direct report that’s open to experimentation and implement the new KPI there first. By choosing a receptive and flexible starting point, you’re setting the stage for a smoother transition.  

Beyond productivity and engagement, developing great KPIs will echo throughout an entire org. By aligning KPIs with strategic goals, businesses can ensure that every team and individual works towards the same objective, creating a cohesive and unified work environment. Moreover, contemporary KPIs often incorporate elements of customer satisfaction, quality of service, or innovation—all key factors in today’s competitive marketplace.  

In brief:

Revisiting your KPIs and incorporating innovative or modern metrics for direct and indirect reports might be the change your organization needs to accurately measure and drive performance.