KPI System: A Tool for Motivation or a Source of Demotivation?
The KPI system is widely discussed in the business world, and at first glance, its implementation may seem simple. However, in practice, developing and applying KPIs often raises many questions. Even experienced leaders face hidden pitfalls. Why does this happen, and what should managers keep in mind?
KPI: What Was Intended vs. What Happens in Reality
The foundation of a KPI system is built on three key principles:
Translating strategic company goals into individual employee tasks
Focusing on performance, not processes — employees are rewarded for results, not effort
Using KPIs as a powerful employee motivation tool
In reality, the third principle often backfires: when KPIs are poorly designed, employees lose motivation and trust in the system.
Top 5 Reasons Why KPIs Demotivate Employees
Overemphasis on quantitative metrics
Companies often track only numbers — such as sales revenue — while ignoring qualitative factors like customer satisfaction, data accuracy, or service quality. As a result, sales managers focus on “selling now” instead of building long-term client loyalty.Lack of resources to achieve KPIs
Goals are set, but the company fails to provide the necessary support. For example, a sales manager is given a strict sales plan without enough leads, automation tools, or marketing support. This makes KPIs feel unfair and demotivating.KPIs that depend too heavily on external factors
When results are outside the employee’s control, KPIs lose their meaning. For instance, total company revenue depends not only on a salesperson’s activity but also on product availability, logistics quality, marketing efforts, and production capacity.Unrealistic or “borrowed” targets
Many companies set KPIs “out of thin air” or copy benchmarks from others without analyzing their own processes. This strips the system of objectivity and turns KPIs into mere bureaucracy.Static KPIs in a changing market
KPIs are often set for long periods and not revised, even when market conditions shift. For example, sales goals may have been realistic at product launch, but once a strong competitor enters the market, those KPIs become unachievable.
What Leaders Should Do to Make KPIs Work
If the KPI system doesn’t deliver the expected results, it’s crucial to review and adjust key performance indicators in time. Flexibility and regular KPI audits help retain valuable employees, maintain customer trust, and prevent financial losses.
To ensure KPIs support motivation rather than harm it, leaders should:
Regularly update KPIs in line with market and internal dynamics
Balance quantitative and qualitative criteria for a fair evaluation
Provide employees with necessary resources — tools, client base, training
Ensure transparency and realistic goals to maintain trust in the system
Author: Zhyldyz Shekekova, Managing Partner at HRLab
www.hrlab.kg