KPI clause: Copy, customize, and use instantly
Introduction
A Key Performance Indicator (KPI) clause defines specific, measurable performance metrics that the parties agree to track in order to assess progress towards key objectives during the term of the agreement. The clause ensures both parties are aligned in their expectations and outlines the agreed-upon goals, targets, and consequences if those goals are not met. This clause is especially useful for service agreements, performance contracts, or any scenario where measurable results are critical.
Below are templates for KPI clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.
Standard KPI clause
This version includes general KPI provisions.
Both parties agree to the following Key Performance Indicators (KPIs) to measure the success of this agreement:[KPI 1: e.g., Delivery time, Customer satisfaction, etc.][KPI 2: e.g., Product quality, Service uptime, etc.][KPI 3: e.g., Revenue targets, Lead generation, etc.]
These KPIs will be tracked and reviewed quarterly. If any KPI falls below the agreed threshold, [Party B] will work with [Party A] to correct the issue within [specified time period].
KPI clause with provision for performance bonuses based on targets
This version applies to performance-based bonuses.
[Party B] agrees to meet the following Key Performance Indicators (KPIs) as part of this agreement:[KPI 1: e.g., 95% on-time delivery rate][KPI 2: e.g., Customer retention rate of 85%]
In the event that [Party B] exceeds these KPIs by more than [X%], [Party A] will provide a performance bonus of [specified amount] as an incentive for exceeding the targets.
KPI clause with provision for monthly reporting
This version applies to monthly reporting.
[Party B] will report the following Key Performance Indicators (KPIs) on a monthly basis:[KPI 1: e.g., Monthly sales growth, Response time][KPI 2: e.g., Customer feedback score, Operational efficiency]
Reports must be submitted to [Party A] by the [specified day] of each month. Failure to meet the agreed KPIs will result in a review meeting to discuss corrective measures.
KPI clause with provision for corrective action if KPIs are unmet
This version applies to corrective action for unmet KPIs.
The following Key Performance Indicators (KPIs) have been agreed upon:[KPI 1: e.g., Response time under 24 hours][KPI 2: e.g., Achieving a 95% customer satisfaction rate]
If any KPI falls below the agreed target for two consecutive reporting periods, [Party B] will implement corrective action within [specified time frame] to address performance gaps. Continuous failure to meet KPIs may result in penalties or termination of the agreement.
KPI clause with provision for KPIs being reviewed and updated annually
This version applies to annual KPI reviews.
[Party A] and [Party B] agree to review and potentially update the Key Performance Indicators (KPIs) on an annual basis. The KPIs will be aligned with the evolving business objectives, and the parties will mutually agree on any necessary adjustments. Any changes to KPIs will be communicated at least [specified number of days] prior to the new cycle starting.
KPI clause with provision for tracking and reporting on client satisfaction
This version applies to client satisfaction.
[Party B] agrees to meet the following KPIs:Client satisfaction score of 90% or higherResponse time to client inquiries within 24 hours
[Party B] will provide a quarterly report detailing client satisfaction metrics. If the client satisfaction score falls below the agreed level, [Party B] will take corrective actions to improve performance.
KPI clause with provision for setting specific sales targets
This version applies to sales targets.
[Party B] will be evaluated based on the following sales-related KPIs:Achieving a sales target of $[X] in revenue per quarterSecuring [X] new clients per quarter
If the sales targets are not met, [Party B] will provide an action plan to address the shortfall and implement corrective measures within [specified time].
KPI clause with provision for continuous tracking of performance metrics
This version applies to continuous tracking.
Both parties agree to continuously track the following KPIs throughout the term of the agreement:[KPI 1: e.g., System uptime, Employee productivity][KPI 2: e.g., Operational efficiency]
Performance will be reviewed monthly to ensure alignment with agreed targets, and any discrepancies will be addressed within a timely manner.
KPI clause with provision for defining penalties for not meeting KPIs
This version applies to penalties for unmet KPIs.
[Party B] agrees to meet the following KPIs:[KPI 1: e.g., Completing 95% of projects on time][KPI 2: e.g., Achieving 90% customer retention rate]
If any KPI is not met within the specified time frame, [Party B] will be subject to a penalty of [specified amount], or [Party A] may seek alternative remedies.
KPI clause with provision for setting quality standards as KPIs
This version applies to quality standards.
The following Key Performance Indicators (KPIs) will be used to assess the quality of service provided:[KPI 1: e.g., 98% accuracy rate in product delivery][KPI 2: e.g., 95% adherence to quality control standards]
[Party B] agrees to implement processes to meet or exceed these quality standards, and any failure to do so will result in a review and corrective action plan.
KPI clause with provision for adjusting KPIs based on business needs
This version applies to adjusting KPIs.
The Key Performance Indicators (KPIs) outlined in this agreement are subject to adjustment based on changes in business priorities or market conditions. Both parties will review the KPIs at the end of each quarter and agree on any necessary adjustments to ensure they remain aligned with current business goals.
KPI clause with provision for monitoring performance against industry benchmarks
This version applies to industry benchmarks.
[Party B]'s performance will be assessed against the following KPIs and compared to industry benchmarks:[KPI 1: e.g., Industry-standard response time for customer inquiries][KPI 2: e.g., Customer satisfaction benchmark for similar services]
If [Party B] does not meet or exceed industry standards, [Party A] will work with [Party B] to implement corrective actions.
KPI clause with provision for integrating customer feedback into KPIs
This version applies to customer feedback.
[Party B] will use customer feedback to track the following KPIs:Achieving an average customer feedback score of [X]Resolving customer issues within [X] hours of reporting
Feedback will be collected via surveys, direct communication, or other methods and will be reviewed to determine if corrective actions are needed.
KPI clause with provision for aligning KPIs with specific project milestones
This version applies to project milestones.
The parties agree to evaluate [Party B]'s performance based on the achievement of specific project milestones, including:[KPI 1: e.g., Completion of [X]% of project tasks by milestone date][KPI 2: e.g., Meeting project deadlines without exceeding budget]
[Party B] will provide progress reports at each milestone to demonstrate KPI achievement.
KPI clause with provision for calculating KPIs based on performance ratios
This version applies to performance ratios.
[Party B] will be evaluated based on the following performance ratios:[KPI 1: e.g., Profit margin ratio][KPI 2: e.g., Cost-to-income ratio]
These ratios will be reviewed on a quarterly basis, and if the ratios fall below the agreed thresholds, corrective actions will be discussed.
KPI clause with provision for assessing employee performance
This version applies to employee performance.
The performance of [Party B]'s employees will be evaluated based on the following KPIs:[KPI 1: e.g., Employee retention rate][KPI 2: e.g., Employee productivity or output per hour]
These KPIs will be reviewed annually, and [Party B] will implement measures to address any performance issues identified.
KPI clause with provision for assessing overall business performance
This version applies to overall business performance.
[Party A] and [Party B] will assess the overall business performance based on KPIs, including:[KPI 1: e.g., Revenue growth percentage][KPI 2: e.g., Market share increase]
These KPIs will be tracked on a quarterly basis, with a review meeting scheduled to evaluate performance against business objectives.
KPI clause with provision for including external performance assessments
This version applies to external assessments.
In addition to internal reviews, [Party A] and [Party B] agree to engage an independent third-party assessor to evaluate performance based on the following KPIs:[KPI 1: e.g., Customer satisfaction][KPI 2: e.g., Efficiency of service delivery]
The third-party evaluation will be conducted annually, and any recommendations will be considered for future performance improvement.
KPI clause with provision for multi-stage performance evaluation
This version applies to multi-stage evaluation.
Performance will be evaluated in stages throughout the duration of the agreement. At each stage, [Party B] will be assessed on the following KPIs:[KPI 1: e.g., Timeliness of deliverables][KPI 2: e.g., Quality of service]
If performance goals are not met at any stage, a review meeting will be scheduled to determine corrective actions before moving forward.
KPI clause with provision for KPI tracking through specific software tools
This version applies to software tools.
[Party A] will track [Party B]'s performance using designated software tools to measure KPIs such as:[KPI 1: e.g., System uptime][KPI 2: e.g., Customer engagement rate]
The software tools will provide real-time tracking and reports, which will be reviewed by both parties on a regular basis.
KPI clause with provision for defining acceptable KPI thresholds
This version applies to threshold definition.
Both parties agree to define the acceptable threshold for each KPI at the outset of the agreement. For example:[KPI 1: e.g., Minimum sales target of $X per quarter][KPI 2: e.g., Minimum customer satisfaction rate of 80%]
Any KPI falling below the agreed threshold will trigger a corrective action plan.
KPI clause with provision for performance reviews based on KPI achievement
This version applies to performance reviews.
[Party B] will undergo a performance review at the end of each evaluation period, based on the achievement of KPIs. KPIs include:[KPI 1: e.g., Efficiency in task completion][KPI 2: e.g., Quality of final deliverables]
If KPIs are met, [Party B] will be eligible for performance bonuses or other incentives.
KPI clause with provision for setting long-term and short-term KPIs
This version applies to both long-term and short-term KPIs.
The parties will agree to both long-term and short-term KPIs to evaluate [Party B]'s performance. Short-term KPIs include:[KPI 1: e.g., Weekly sales targets]
Long-term KPIs include:[KPI 2: e.g., Annual growth targets]
Performance will be reviewed periodically to ensure progress toward both sets of KPIs.
KPI clause with provision for evaluating team collaboration
This version applies to team collaboration.
[Party B]'s performance will also be evaluated on the level of team collaboration, including:[KPI 1: e.g., Collaboration score from team members][KPI 2: e.g., Percentage of joint tasks completed on time]
These KPIs will be reviewed quarterly to ensure that [Party B] is fostering effective teamwork and communication.
KPI clause with provision for setting customer acquisition targets
This version applies to customer acquisition.
[Party B] will be evaluated based on the following customer acquisition KPIs:[KPI 1: e.g., Achieving [X] new customer sign-ups per quarter][KPI 2: e.g., Conversion rate of leads to paying customers]
Failure to meet these KPIs will trigger a review and a revised customer acquisition plan.
KPI clause with provision for tracking operational efficiency
This version applies to operational efficiency.
The following operational KPIs will be tracked to measure the efficiency of [Party B]'s operations:[KPI 1: e.g., Reduction in average processing time][KPI 2: e.g., Number of tasks completed per employee per day]
Regular evaluations will ensure that operational goals are being met efficiently.
KPI clause with provision for tracking compliance with safety standards
This version applies to safety standards compliance.
[Party B] will be evaluated on its compliance with safety standards, as measured by:[KPI 1: e.g., Compliance rate with safety protocols][KPI 2: e.g., Number of safety-related incidents per quarter]
If these KPIs are not met, [Party B] will be required to implement corrective actions to improve safety compliance.
KPI clause with provision for setting product quality benchmarks
This version applies to product quality.
[Party B] agrees to meet the following product quality KPIs:[KPI 1: e.g., Defect rate under [X]%][KPI 2: e.g., Customer satisfaction rate regarding product quality]
Failure to meet these KPIs will result in corrective actions, including further quality control measures.
KPI clause with provision for setting response time targets
This version applies to response time.
[Party A] and [Party B] agree on the following KPIs for response times:[KPI 1: e.g., Respond to all customer inquiries within 24 hours][KPI 2: e.g., Resolve technical issues within 48 hours]
Any delays outside of the agreed response times will be flagged during the performance review and corrective measures will be taken.
KPI clause with provision for assessing cost savings
This version applies to cost savings.
[Party B] will be evaluated on its ability to meet cost-saving targets, including:[KPI 1: e.g., Reducing operational costs by [X]% over [X] months][KPI 2: e.g., Reducing waste or resource consumption by [X]%]
Performance against these KPIs will directly impact the annual review process and may influence future targets.
KPI clause with provision for setting retention rate goals
This version applies to retention rates.
[Party B] will be assessed on customer retention, with specific KPIs including:[KPI 1: e.g., Achieving a customer retention rate of at least [X]% per quarter][KPI 2: e.g., Reducing churn rate by [X]%]
Failure to meet these targets will result in a review meeting to discuss retention strategies and improvements.
KPI clause with provision for adjusting KPIs based on performance reviews
This version applies to dynamic KPI adjustment.
KPIs may be adjusted following performance reviews if the business objectives change or if new challenges arise. Both parties agree to meet at the end of each [quarter/year] to evaluate performance and revise KPIs to better reflect current priorities.
KPI clause with provision for tracking service uptime
This version applies to service uptime.
The following KPIs will track the availability and uptime of services provided by [Party B]:[KPI 1: e.g., Achieving [X]% uptime on all services][KPI 2: e.g., Resolving service outages within [X] hours]
[Party B] agrees to provide monthly uptime reports, and failure to meet these KPIs will trigger corrective actions, including additional resources or upgrades.
KPI clause with provision for setting customer referral targets
This version applies to customer referrals.
[Party B] will track the number of customer referrals generated, with KPIs including:[KPI 1: e.g., Achieving at least [X] customer referrals per quarter][KPI 2: e.g., Generating a referral conversion rate of [X]%]
The number of referrals and conversion rates will be reviewed quarterly, and failure to meet targets may result in adjustments to marketing strategies.
KPI clause with provision for defining project completion rate
This version applies to project completion.
[Party B]'s performance will be evaluated based on the percentage of project milestones completed on time, as measured by the following KPIs:[KPI 1: e.g., Achieving [X]% completion of all agreed-upon project milestones][KPI 2: e.g., Completing projects within the established budget]
If milestones are missed, a review will be conducted to understand the reasons and implement a corrective action plan.
KPI clause with provision for setting inventory management KPIs
This version applies to inventory management.
[Party B] will be evaluated based on inventory management KPIs, including:[KPI 1: e.g., Maintaining stock levels within agreed parameters][KPI 2: e.g., Reducing stockouts and excess inventory by [X]%]
[Party B] will provide monthly reports on inventory levels, and failure to meet these KPIs will lead to discussions of process improvements.
KPI clause with provision for tracking training completion rates
This version applies to training completion rates.
[Party B] will track training completion rates for its employees, with KPIs including:[KPI 1: e.g., Ensuring that [X]% of employees complete mandatory training within [X] months][KPI 2: e.g., Achieving a [X]% pass rate on internal training assessments]
Regular reviews will assess whether training programs are meeting the required standards.
KPI clause with provision for using KPIs to monitor supplier performance
This version applies to supplier performance.
[Party A] will track the performance of suppliers based on KPIs such as:[KPI 1: e.g., On-time delivery rate][KPI 2: e.g., Quality control pass rate]
Suppliers who consistently fall below the required performance levels will be flagged, and [Party A] will take corrective action to mitigate any impact.
KPI clause with provision for setting sales pipeline goals
This version applies to sales pipelines.
[Party B] agrees to meet the following sales pipeline KPIs:[KPI 1: e.g., Generating [X] leads per month][KPI 2: e.g., Converting [X]% of leads into sales opportunities]
These targets will be reviewed monthly, and performance issues will be addressed with the sales team.
KPI clause with provision for assessing supplier lead time
This version applies to lead time.
[Party B] will monitor and report the following lead time KPIs for supplier orders:[KPI 1: e.g., Reducing supplier lead times to [X] days][KPI 2: e.g., Achieving [X]% on-time supplier deliveries]
Failure to meet the lead time KPIs will trigger a review and an action plan to reduce delays.
KPI clause with provision for setting operational cost reduction goals
This version applies to cost reduction goals.
[Party A] will set the following operational cost reduction KPIs for [Party B]:[KPI 1: e.g., Reducing operational costs by [X]% over [X] months][KPI 2: e.g., Cutting down on waste by [X]%]
[Party B] will submit quarterly reports demonstrating progress toward these goals.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.