15 common KPI questions: Quick insights on the basics
Here at Klipfolio, we receive many questions (ranging from the absolute basic to fairly advanced) about metrics and KPIs. And we're humbled that so many people see us as their definitive source on such topics.
Our goal has always been to answer these questions with the in-depth, nuanced responses that our readers deserve. The growth of Mindful Metrics shows that many of our readers appreciate such responses.
But we get it. You're busy trying to write a paper for class or grow your startup and sometimes would much rather prefer a few simple sentences as opposed to anything even remotely longform.
So, here goes. Just click on each of the common questions below to be taken to the most concise answer I could come up with.
- What does KPI stand for?
- What is a KPI?
- What is a KPI used for?
- How do I develop KPIs?
- Who determines KPIs?
- How do I create a KPI?
- Which KPIs should I use?
- When should I use a KPI?
- Why should I review KPIs?
- When should I review KPIs?
- How do I report on KPIs?
- How many KPIs should I track?
- Why are KPIs important?
- Which companies use KPIs?
- What is a KPI dashboard?
1. What does KPI stand for?
KPI stands for key performance indicator.
2. What is a KPI?
A KPI is a measurable value that demonstrates how effectively a company is achieving key business objectives.
3. What is a KPI used for?
KPIs are used by individuals and organizations to evaluate their success at reaching critical targets. High-level KPIs may focus on the overall performance of the enterprise, while low-level KPIs may focus on processes within departments.
4. How do I develop KPIs?
We recommend the SMARTER approach. SMARTER stands for Specific, Measurable, Attainable, Relevant, Time-bound, Evaluate and Reevaluate.
As you create an initial list of values that best demonstrate progress toward key business objectives, ask yourself and/or your team the following questions about them:
- Is your objective Specific?
- Can you Measure progress towards that goal?
- Is the goal realistically Attainable?
- How Relevant is the goal to your organization?
- What is the Time-frame for achieving this goal?
- How and when will you Evaluate short-term progress?
- How and when will you Reevaluate longer-term progress
5. Who determines KPIs?
The short answer: anyone. KPIs are used by individuals, for example, to pursue health-related goals, and they are used by organizations to pursue business goals.
Within businesses, there are typically departmental KPIs (such as those for marketing, sales and customer support, to name a few). These KPIs are often established by the departmental leaders, and the departmental managers then ensure the team is aligned and working accordingly.
Then there are the overarching KPIs, typically set by the organization's CEO and executive team. The departmental KPIs should be created in such a way that their sum result moves the needle for the overarching KPIs.
6. How do I create a KPI?
Let's say your overall objective is to increase book sales for this year. You’re going to call this KPI your Book Sales KPI. Here’s how you might define the KPI:
- What: To increase book sales by 15% this year.
- Why: Achieving this target will allow you to hire another agent.
- Measure: Progress will be measured as an increase in number of books sold and resulting revenue.
- How: Drive traffic through a blog focused on topics related to our publishing niche.
- Who: The Content Marketing Manager will be responsible for this KPI.
- Outcome: Book sales will have increased by 15% this year.
- When: KPI progress will be reviewed on a monthly basis.
7. Which KPIs should I use?
There is no such thing as a "best KPI." There is only the best KPI for your particular goals. Determine which goals are most important to you, your team and/or your company, and run it through the SMARTER questions in Question #4 above.
8. When should I use a KPI?
Use a KPI when you need to track progress toward a goal over time.
9. Why should I review KPIs?
Goals may change over time, and performance and progress toward those goals certainly will. As such, a KPI from three months ago may not be quite as relevant. This is why it's important not to set and forget your KPIs.
10. When should I review KPIs?
KPIs should be reviewed at points relevant to the final time you've set for achieving the goal. Using the example in #6 above, we established that the goal should be achieved within one year's time.
Reviews, then, could be monthly if that's enough time to measure progress.
11. How do I report on KPIs?
A KPI report is a presentation that summarizes your current performance compared to your objectives. It can be presented in a variety of ways, from spreadsheets and slide decks to formal written reports and, as we prefer, dashboards.
Traditionally, KPI reports are developed on a quarterly basis. But, depending on how in-depth these reports are, you may want to create a KPI report each time you conduct a KPI review.
12. How many KPIs should I track?
In our experience, the fewer the better. It can be easy to load up on too many KPIs, or to measure KPIs that aren't quite right for the particular stage of your company. Research suggests that teams of 3-5 people are most efficient; I personally think this range is also a good maximum # of KPIs.
13. Why are KPIs important?
The pursuit of goals depends on the focused, consistent delivery of results. KPIs are important because they serve as the guideposts to get you where you want to be.
14. Which companies use KPIs?
All organizations, regardless of size and sector, that have a goal in mind and that believe creating a strategy to reach those goals is important.
15. What is a KPI dashboard?
A KPI dashboard creates a real-time visualization (on mobile, desktop or to a wall-mounted TV in your office) of the KPIs you've selected. The best KPI dashboards are customizable, allowing you to, among other things, change colors, organize your KPIs, and see your progress in a single glance.
Here are a few additional resources: