What Are KPI’s (Key Performance Indicators)?
KPI’s are metrics used to measure the success of a business process or strategy. A KPI can be used as a goal and tracked over time to measure progress. KPIs are often used to measure marketing and sales initiatives and can be applied to almost any business function or process. KPI’s are vital for almost every business. What you measure, you can manage. It is vital to have metrics to understand where you are in meeting your goals. KPI’s help you identify the drivers behind your success and not the consequences. You can have KPI’s that are tracked weekly, monthly, quarterly and even annually. The right KPI’s depends on your business, your goals and the industry you are in.
Benefits of KPI’s
- Identify drivers behind your success – KPIs help you understand the drivers behind your success and not the consequences.
- Drive focus – KPIs help to drive focus by allowing you to prioritize what is important to track and measure.
- See the bigger picture – KPIs can help you see the bigger picture and understand the impact of different activities.
- Improve results – KPIs help you to improve results by directing your energy and resources towards what really matters.
Types of KPI’s
- Financial – Financial KPIs measure your company’s financial health. Examples of financial KPIs are: Revenue, Profit, Cost of goods sold, Asset turnover, etc.
- Customer
Customer KPIs measure your company’s relationship with customers. Examples of customer KPIs are: Customer Satisfaction, Customer retention rate, Net Promoter Score, etc.
Business Process - Business Process KPIs measure your company’s internal processes. Examples of Business Process KPIs are: Cycle time, On-time deliveries, Employee satisfaction, etc.
Strategic Goals - Strategic Goals KPIs are applied at the organizational level. Examples of Strategic Goals KPIs are: Revenue growth, Market share, New product adoption rate, etc.
How to Set KPI’s
- Start with your strategy – It is best to connect your KPI’s to your business strategy and goals.
- Be SMART – Be sure the KPI’s are specific, measurable, attainable, relevant and timely.
- Stay flexible – Be sure to stay flexible and adjust your KPI’s as your business changes and grows.
Examples of KPI’s
- Financial KPIs – Revenue, Profit, Gross margin, Net margin/profitability, COGS, Customer retention rate, Credit sales as a percentage of the total sales, etc.
- Customer KPIs – Customer retention rate, On-time deliveries, Customer satisfaction, etc.
- Business Process KPIs – Cycle time, Lead time, etc.
- Strategic Goals – Revenue growth, Market share, Product adoption rate, etc.
Best Practices for KPI’s
- Be SMART – Be sure the KPI’s are specific, measurable, attainable, relevant and timely.
- Be connected to your strategy – It is best to connect your KPI’s to your business strategy and goals.
- Stay flexible – Be sure to stay flexible and adjust your KPI’s as your business changes and grows.
KPI’s for Different Industries
- Financial KPIs – Revenues, Profit, Gross margin, COGS, Customer retention rate, Credit sales as a percentage of the total sales, etc.
- Customer KPIs – Customer satisfaction, On-time deliveries, Customer retention rate, Net Promoter Score, etc.
- Business Process KPIs – Cycle time, Lead time, First-pass yield, etc.
- Strategic Goals – Revenue growth, Market share, Product adoption rate, New product adoption rate, etc.
How to Measure KPI’s
- Collect your data – Be sure to collect your data and keep it up to date. –
- Analyze your data – Once you have your data, analyze it to identify trends and areas of improvement.
- Take action – Once you have analyzed the data, you can use it to take action to improve your business.
- Communicate results – It is important to communicate the results of your KPIs to your team and stakeholders.
KPI Dashboard
A KPI dashboard is a visual representation of the data that shows your KPIs. It can be a spreadsheet, a graph, or a dashboard. A KPI dashboard can help you to track your KPIs and provide valuable insight into your business. KPI dashboards are helpful because they allow you to track your business data in one place and provide a visual representation of the data.