Key Performance Indicators is a quantifiable statistic showing how well a firm accomplishes essential business objectives. Companies use KPIs to calculate success in reaching targets. A high KPI indicates a successful business. KPI examples are necessary to track the success of the firm. But solely focusing on the KPI can be harmful and can lead to disorganisation. To achieve the desired goals set by the organisation, it is essential to know what is a KPI, its examples, and how to use them to gain profits. KPI helps to measure whether the company has fulfilled the desired goals and objectives or not.
Types of KPI
Most KPIs are measurable in quantitative value; however, it becomes difficult to measure employee performance or satisfaction. For this, different parameters are required. Below are
other types of KPI examples;
Quantitative
Indicators like average order value and profit margin come under the quantitative part. Quantitative KPIs can further be divided into two types;
- Continuous: These KPIs include decimal places and specific values.
- Discrete: KPIs are measured in whole numbers and are used for tracking events, the Number of complaints etc.
Qualitative
It is essential for an organisation to measure quantitative values, but they don’t always put up the entire picture. Therefore, it is important to take into account qualitative indicators as well. For example, customer satisfaction, emotions, feelings etc.
Leading
Leading indexes forecast the prediction of business performance and decisions for long-term data patterns. An example of KPI leading is predicting new consumers in marketing strategies. After the leading KPI has been established, monitoring predictions based on client performance becomes easy.
Lagging
Lagging focuses on the past to figure out an action or initiative that already has taken place.
Lagging KPI examples include figuring out monthly or quarterly performance. These KPIs are used to measure organisations’ past performance; however, the only disadvantage is that because of their historical performance, their usefulness is limited. With trailing measurements, it may be too late to rectify deficiencies.
Input
Input indicators examine the resources needed for a business undertaking. These metrics usually deal with marketing campaigns, new launches, or consumer engagement, as these are the factors where resources are required. Examples of input KPIs are; payment for staff, expenses like hiring writers, raw materials etc. Input indicators help in maintaining cost efficiency and assist in maintaining budget management.
Process
Process metrics focus on how efficient the business processes are in your organisation. Process KPI examples are customer ticket support resolution, Number of tickets being opened, Number of tickets being solved etc.
Output
These might be qualitative or quantitative. The output indicators measure the success or failure of an organisation’s venture.
Practical
Practical metrics focus on business processes. The main difference between output KPI and practical KPI is that practical KPI focuses on the existing goals and how they affect the business.
Directional
Directional KPI focuses on patterns, whether they are improving, stagnant or going backwards. An example is Facebook reach, which shows how many people have visited the site, the engagement ratio etc.
Action
Action KPIs focus on an organisation’s commitment to bring changes and how effective these changes are. These include any internal change, investing money in charity, etc. The actionable KPIs measure how these changes are being implemented and within what timeframe.
Financial
Financial KPIs are quantitative KPIs that focus on growth, stability etc. It includes the profit margin and success of a business. It is advisable to balance all the different KPIs for the better success of an organisation.
Why KPIs are important?
- KPI acts as a guide to help you reach your goals. KPIs help to unite the employees to work together and achieve a common goal. KPI helps in engagement metrics and helps in measuring employee performance.
- KPIs should be linked with the employee’s sense of commitment. It should motivate them to work efficiently and serve the company.
- Performance KPIs help employees measure their growth, daily report and focus on their role in the company.
KPI examples
The KPI examples provide insight into the company. One should be mindful of selecting the right KPI for their organisation. There are various ways to differentiate between KPIs. For example, KPIs for human resources, finance, and sale are essential for any company. Selecting the right KPI for the correct department helps in making your company grow positively.
KPI for Sales
- New bound leads
- Lead conversion
- New qualified opportunities
- Total pipeline values
- Opportunity to order
- Average order value
- Average sales cycle time
KPI for Managers
- Customer acquisition cost
- Customer lifetime value
- Sales target
- Revenue per FTE
- Operating margin
- Gross margin
Project Management KPIs
- On-time completion
- Milestones on time
- Adjustments to schedule
- Planned value
- Net promoter score
Marketing KPIs
- Sales qualified leads
- Marketing qualified leads
- Cost per lead
- Conversion rates
- Total revenue
Operations KPIs
- Labour utilisation
- Employee turnover rate
- Employee absence rate
- Employee training rate
- Cash flow
- Customer lifetime value
- Operating margins
Finance KPIs
- Gross profit margin
- Operating profit margin
- Net profit margin
- Working capital ratio
- Cash conversion cycle
- Debt to equity ratio
Human Resource KPIs
- Absenteeism rate
- Promotion rate
- Successor gap rate
- Revenue per FTE
Social media KPIs
- Total reach
- Total impressions
- Audience growth rate
- Interest rate
- Key post or hashtag reach
KPI Anatomy
The first thing while creating a KPI is to understand the structure. There are four indicators of a good KPI:
Measure
Every complex situation is measured and explicitly defined in how it will do so. For example, if the KPI is the average transaction value, the measure will be how much money each person spends on each transaction.
Target
Every KPI requires a target date by which it will complete the desired outcome.
Data source
To minimise confusion about how data is accessed, it is crucial to determine where the information comes from. This is possible by focusing on the customers who use the website.
Reporting schedule
After deciding what information goes into the KPI, it is essential to check how often the details are being updated.
Advantages of KPI
- KPIs assist you in identifying and addressing disparities. If you aren’t meeting a target or goal, it might mean that you further need more training. Knowing there is a disparity in the skill gap helps in training the employees accordingly. Keeping the desired goal helps to evaluate the performance of each employee.
- KPIs are important because it helps in measuring the desired outcome after an event. Without having a proper goal, it becomes impossible to achieve targets.
- KPIs are frequently related to incentives in some organisations, such as monthly bonuses given to individuals who bring in the most money or are able to bring in more money. Having incentives like gift vouchers encourages employees to achieve the target set by the company.
- KPIs help in stimulating communication among employees. Setting unrealistic goals often demotivates employees. Satisfied employees tend to stay for more extended periods.
- KPIs help in figuring out facts; therefore, if one person or department isn’t working properly, KPIs will help in figuring out the problem and providing the solution.
- Recording KPIs helps in detecting data and patterns, which will help in making necessary changes. For example, if the social media during the winter months is less, then one can plan a strategy to improve engagement during the summer months.
- To reach a specific business goal, it is necessary to set a definite target and aim for it. Setting the overarching objectives for the company KPIs will help break them down into more doable and manageable. However, since KPIs have been established, it doesn’t imply one cannot alter them. If your reports show that the KPI is never fulfilled, it may be essential to examine and change them.
- KPIs help understand a clear picture of the sales department and the organisation’s goals. It motivates salespeople to opt for pre-defined targets more efficiently. This also fosters healthy rivalry among sales teams since the manager with the best performance receives more awards.
Creating, monitoring and KPIs are important for any organisation, but the process should not be a burdensome and time-consuming. Combining your KPIs into a cross-platform dashboard can create a huge impact. Having real-time analytics that updates automatically in one location empowers teams and individuals to enhance progress and time spent on activities. Because the KPIs are objective in nature, staff customers comprehend them better. This allows the staff to take necessary action in response to the concerns.first thing while creating a KPI is to understand the structure. There are four indicators of a good KPI:
