Introduction to Key Performance Indicators
A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company is achieving key business objectives. Organizations use KPIs to evaluate their success at reaching targets. Learn more: What is a key performance indicator (KPI)?
Selecting the right KPIs will depend on your industry and which part of the business you are looking to track. Each department will use different KPI types to measure success based on specific business goals and targets. Find out what types of key performance indicators are relevant to your department, industry, or role: Types of KPIs.
Once you’ve selected your key business metrics, you will want to track these KPIs in a real-time reporting tool. KPI tracking can be done using dashboard software, giving your entire organization insights into your current performance. Learn more about how to track KPIs in a report or dashboard: Dashboard Examples.
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What is KPI software?
KPI software enables businesses to create, manage and analyze data from KPIs . The software allows organisations to enter their data into one specially designed system, or connect external services for faster and more accurate data collection. This type of software allows businesses to visualize and comprehend data from a number of KPIs that represent different areas of a business, all in one place. Companies benefit from KPI software through faster and more accurate data collection, instant reports on performance, and alerts when a KPI is over or under achieving. KPI Software centralizes businesses data, while simplifying real-time reporting to always give them a competitive edge. KPI Software increases data visibility as when it is in the cloud it is mobile.
A Business Metric is a quantifiable measure that is used to track and assess the status of a specific business process. Every area of business has specific metrics that should be monitored – marketing metrics can include tracking campaign and program statistics, while sales metrics may look at the number of new opportunities and leads in your database, and executive metrics will focus more on big picture financial metrics. Learn more: Business Metrics.
Types of KPIs
Depending on your industry and the specific department you are interested in tracking, there are a number of KPI types your business will want to monitor. Each department will want to measure success based on specific goals and targets. Take a look at the departmental KPI examples below to learn more about the KPIs you should be measuring:
KPI Reports and Dashboards
To be useful, KPIs need to be monitored and reported on; if they change in real-time, they should be monitored in real-time. Dashboards are the perfect tool for your KPI reports as they can be used to visually depict the performance of an enterprise, a specific department, or a key business operation.
Here are some KPI reports and dashboard examples to demonstrate how you can present key performance indicators to your team:
How to write and develop KPIs
When writing or developing a KPI, you need to consider how that KPI relates to a specific business outcome or objective. KPIs need to be customized to your business situation, and should be developed to help you achieve your goals. Follow these steps when writing a KPI:
- Write a clear objective for your KPI
- Share your KPI with stakeholders
- Review the KPI on a weekly or monthly basis
- Make sure the KPI is actionable
- Evolve your KPI to fit the changing needs of the business
- Check to see that the KPI is attainable
- Update your KPI objectives as needed
KPI Best Practices
Measuring and monitoring business performance is critical, but focusing on the wrong key performance indicators can be detrimental. So can be poorly structured KPIs, or KPIs that are too difficult, costly to obtain, or to monitor on a regular basis.
So what makes business performance indicators “key” and how should a business owner, executive or manager select them? There are six factors that separate effective, value creating KPIs from detrimental, value diminishing KPIs. The right KPIs for your business should follow these KPI best practices:
- Aligned - Make sure the KPIs your are choosing align with the strategic goals and objectives of your organization.
- Attainable - The KPIs you choose to measure should have data that can be easily obtained.
- Acute - KPIs should keep everyone on the same page and moving in the same direction.
- Accurate - The data flowing into the KPI should be reliable and accurate.
- Actionable - Does the KPI give you insight into the business that is actionable?
- Alive - Your business is always growing and changing. Your KPIs should evolve as well.
Learn more about KPI best practices.