Team KPIs: How to select & measure the right KPIs?

Your primary goal is to ensure project success and team efficiency.

But amidst the maze of timelines, deliverables, and resource allocations, there’s a critical element often overlooked: the happiness of your team.

Yet, it’s the cornerstone of your success as a manager.

Research shows that happy teams are 20% more productive than their less happy counterparts.
There’s also a staggering 41% decrease in absenteeism.
The American Customer Satisfaction Index shows a direct link between employee satisfaction and customer satisfaction.
Happy teams, with higher retention rates, can significantly reduce these costs. And when replacing team members cost tens of thousands of dollars, it’s not a small reduction.
Glassdoor’s findings further accentuate the benefits: companies brimming with satisfied employees boast superior employer branding.
A study by MIT reveals that teams reporting high satisfaction levels exhibit markedly improved collaboration.
And it all leads to a 22% surge in profitability.

So, how do you gauge if your team members are genuinely fulfilled? The solution lies in defining the right team KPIs.

Here’s what this article will delve into:

The common mistakes when choosing team KPIs
Some examples of team KPIs with their pros and cons
Why mood is the best KPI
How to start tracking the mood of your team

8 common mistakes with team KPIs

Before we go into some examples of team KPIs, it’s important to know some of the mistakes that are easy to make with KPIs.

Because bad KPIs will create more problem than not having any KPIs at all. Imagine you’re not tracking the right indicator, it can make you double down on the wrong things. Not a good situation to be in.

1/ Not aligning KPIs with business goals

It’s like having a map but not knowing your destination. KPIs should mirror your business objectives. Misalignment leads to chasing the wrong metrics.

To avoid this, regularly cross-check your KPIs with your overall business strategy. Ensure each KPI is a stepping stone towards your main goals.

2/ Using too many KPIs

Too many KPIs can cloud your focus. It’s like trying to juggle too many balls at once – eventually, you’ll drop one.

Limit KPIs to a manageable number that covers all critical areas without overlap. This way, you can concentrate on what truly matters without getting overwhelmed.

3/ Setting unrealistic or unclear targets

Setting goals too high or vague is like shooting an arrow in the dark.

Ensure your KPIs are achievable and crystal clear. Regularly review them to see if they’re realistic and adjust if necessary.

Clear, attainable targets motivate your team to strive for success.

4/ Lack of communication and understanding

If your team doesn’t understand the KPIs, you’ll get some backlash for sure.

Involve your team in the KPI setting process and explain the rationale behind each one. This fosters a sense of ownership and clarity about what’s expected.

5/ Not involving the team in setting KPIs

Excluding your team from KPI discussions is like sailing without a crew. Involvement breeds commitment.

Encourage team input to ensure the KPIs are relevant and embraced by everyone.

6/ Neglecting to regularly review and discuss KPIs

KPIs aren’t set-and-forget. They need regular check-ups, like a car needs servicing.

Review them periodically with your team to ensure they remain relevant and reflect current business needs.

7/ Using KPIs as a punishment tool

Using KPIs to penalize rather than guide is counterproductive. It breeds fear, not motivation.

Use KPIs as a tool for growth and development, not as a stick to beat your team with.

8/ Focusing solely on quantitative measures

Quantitative KPIs are important, but they don’t tell the whole story.

Include qualitative measures to get a fuller picture of your team’s performance. It’s about balancing numbers with narratives.

Some examples of team KPIs

So now that you know more about what not to do with team KPIs, let’s see some of these KPIs.

Note that this section could be 5000 words long if we were detailing them all but like we said earlier, keeping things simple without too many KPIs is the right thing to do so we’ll only go for the main ones.

To help you find the right KPIs, we are adding situations when we think they’re useful and situations when we think it’s not.

By doing this with your current KPIs or the ones you are thinking about adding, it’ll be much easier to know if they’ll be useful in your context.

Productivity

This is a classic one where you measure the the output of each team member over a given period.

Pros: Directly correlates to business efficiency; easy to quantify.
Cons: May not accurately reflect quality of work or team collaboration.
Valuable in: High-output environments, such as manufacturing or sales.
Not as effective in: Creative or R&D teams where quality and innovation are more important than quantity.

Customer satisfaction

Gauges how satisfied customers are with a team’s service or product, often measured through surveys.

Pros: Direct feedback from customers; aligns team goals with customer needs.
Cons: Subjective; can be influenced by factors outside the team’s control.
Valuable in: Customer service, retail, and service-based industries.
Not as effective in: Internal teams with no direct customer interaction.

Team turnover rate

Measures the rate at which team members leave and need to be replaced.

Pros: Indicates team stability and, indirectly, job satisfaction.
Cons: High turnover might be due to factors beyond the team’s control.
Valuable in: All industries, as a general health check of team environment.
Not as effective in: Industries with naturally high turnover rates, like hospitality.

Project completion rate

Measures the rate at which the team completes projects or tasks on time.

Pros: Clearly shows efficiency and effectiveness in meeting deadlines.
Cons: Can lead to rushed work if deadlines are overly prioritized.
Valuable in: Project-based environments like IT, construction, and marketing.
Not as effective in: Continuous, non-project-based roles.

Absenteeism rate

Tracks the frequency and duration of unscheduled absences.

Pros: Highlights potential issues with engagement or workplace environment.
Cons: High rates can be due to legitimate health concerns or external factors.
Valuable in: All industries, for monitoring team health and morale.
Not as effective in: Roles with flexible work arrangements or remote work.

Employee engagement level

Measures the level of commitment and motivation among team members, often through surveys.

Pros: Indicates team morale and potential for productivity.
Cons: Subjective and influenced by many external factors.
Valuable in: All industries, particularly in knowledge-based and creative roles.
Not as effective in: Situations where engagement is difficult to measure or influence.

Here are a few others you might find useful:

Revenue per wmployee
Quality of work
Employee Net Promoter Score (eNPS)
Team utilization rate

Lagging vs leading KPIs

The problem with a lot of these commonly used KPIs is that they are often lagging indicators. If productivity is low, it’s already too late. Same with absenteeism rate, turnover rate, customer satisfaction, etc.

That’s why in your KPIs, you absolutely need a leading indicator. It’s an indicator that is a predictor of the problems to come.

Employee engagement level is one. If it drops, it’s indicative that productivity and other lagging indicators will also drop soon, but it gives you time to correct course before it impacts the team and eventually the business too much.

Team mood as a KPI

The best KPI to measure your team’s well-being is actually its mood.

But aiming for perfect moods isn’t the goal. It will only create unrealistic expectations.

Mood is subjective, and each individual perceives their happiness differently. Thus, using an absolute value for mood is nonsensical.

The key is to track mood’s relative value over time. This approach recognizes individual differences and focuses on trends rather than absolute figures.

It’s a sensitive barometer for the team’s overall temperature and is a great an early indicator of potential issues that need addressing.

To help you with that, we have 11 free resources to help you set up mood tracking.

Using TeamMood to track the mood of the team

But how do you track mood?

Instead of setting up everything yourself, the best way to get started and make sure to keep it going is to use a dedicated tool.

TeamMood is one of those tools and allows you to have get the mood of each team member really easily.

Here’s how it works.

1/ Mood check-in notification

Once you have signed up and added your team, they’ll start receiving an email asking for their mood.

It’s anonymous and the written comment is optional. So it really takes only a couple of clicks for them to give their mood.

2/ Team mood overview

As a manager, you can then check all the moods over time and see exactly when there’s a increase or a decrease to correlate it with specific events or actions.

3/ Analytics to track the mood as a KPI

And once you have enough data, you can dive into the analytics dashboard to see the evolution of your indicator over time.

With TeamMood, you can set up a great leading indicator in no time for your team. And you get a lot of other benefits:

TeamMood increases feedback frequency. Get daily or weekly notifications to everyone in your team in just a few minutes after signing up.
TeamMood is fun. The only thing your teammates need to do is click on their corresponding mood and they are done. Written comments are optional. It’s perfect to start getting more feedback. And it’s easy and quick enough to keep this habit in the long term.
TeamMood is anonymous. Your teammates won’t be scared to give honest feedback because their identity is hidden.
TeamMood helps you transform feedback into action. Our analytics dashboard help you monitor and analyze feedback to uncover actionable insights more easily.

Learn more about TeamMood and sign up here

Next steps

Now that you’ve got the lowdown on KPIs and their implementation, what’s next?

Start by assessing your current KPIs against the insights shared here.

Are they aligned with your business goals?

Do they cover both quantitative and qualitative aspects?

Are they SMART (Specific, Measurable, Achievable, Relevant, and Time-Bound)?

Initiate discussions with your team to revisit and refine your KPIs.

Remember, this is an ongoing process. Regularly review and adapt your KPIs to ensure they continue to serve as effective tools for measuring and guiding your team’s success.

Your journey towards more effective management and a happier, more productive team begins now!

Header photo by Dawid Zawiła