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A KPI Performance Agreement: What it is and Why it Matters

A KPI (key performance indicator) performance agreement is a document that outlines the expectations and goals for an employee or team. It identifies specific KPIs that will be measured and tracked, along with the associated targets. The agreement serves as a roadmap for performance, providing a framework for the employee to focus on achieving key objectives and continuously improving.

Why is a KPI performance agreement important?

A KPI performance agreement is an essential tool for ensuring that everyone is on the same page. It establishes clear expectations and goals, allowing employees to holistically understand their performance. With a defined set of KPIs, employees are better equipped to prioritize and focus on the most critical areas of their work.

For managers, a KPI performance agreement provides clarity and transparency around expectations. It can help managers identify problem areas quickly, set achievable targets, and provide feedback for improvement. This can lead to increased motivation and engagement from employees, as they can see the direct impact of their work on the company`s goals.

How to create a KPI performance agreement:

1. Define the Objectives: Start by defining the purpose of the performance agreement. This should include company-wide goals and how the employee or team can contribute towards achieving them.

2. Identify Critical KPIs: Determine the most important KPIs related to the employee`s work. These should be quantifiable and directly related to the employee`s performance.

3. Set Targets: Establish realistic and achievable targets for each KPI. These targets should be challenging but attainable.

4. Determine the Timeline: Determine the timeline for achieving each of the KPIs. This should include both short-term and long-term goals.

5. Establish Performance Review Process: Define how often reviews will take place, what format they will take and how they will be conducted. This process should outline the criteria for evaluation, including how the employee`s performance will be measured and assessed.


A KPI performance agreement is an essential tool for driving employee engagement and performance. The agreement provides a framework for achieving company-wide goals while enabling employees to focus on critical areas of their work. Managers can use KPI performance agreements to measure and track performance, identify areas of improvement, and provide feedback that drives continuous improvement. With a well-crafted KPI performance agreement, employees and managers can work together towards achieving shared goals.