Key Performance Indicators

Key Performance Indicators (KPIs) – All You Need To Know

Progress is key to both the survival and long-term success of any business. But the real question is, what is the key to progress? The answer is Key Performance Indicators.

What Are Key Performance Indicators?

Key Performance Indicators (KPIs) refer to a set of quantifiable measurements that are used to gauge an organisation’s overall long-term performance at any given time.

For example, a software company striving to attain the fastest growth in its industry may consider year-over-year (YOY) revenue growth as its Key Performance Indicator. Alternatively, a retail chain may place more value on same-store sales as the best KPI metric in which to gauge its growth.

The Key To Success

Key Performance Indicators are a staple in every business ― for good reason too.

You can’t improve what you can’t measure. Key Performance Indicators allow you to identify your goal and then develop a plan to help you achieve it in real-time.

Depending on what you want to accomplish in your business, your Key Performance Indicators may change. Furthermore, larger organisations may have multiple KPIs for every department or segment of the business.

Types Of KPIs

There are various types of KPIs. These include:

  • Financial Metrics: Typically focus on revenue and profit margins.
  • Customer Metrics: Typically focus on per-customer efficiency, customer satisfaction and customer retention.
  • Process Performance Metrics: Typically focus on operational performance across the organization.

What Are The 5 Key Performance Indicators?

KPIs vary from business to business. But in general, five of the most commonly used KPIs include:

  • Revenue growth
  • Revenue per client
  • Profit margin
  • Client retention rate
  • Customer satisfaction

What Is a Good KPI?

A good KPI has the following attributes:

  • Provides objective and clear information of progress towards an end-goal.
  • Tracks and measures factors such as efficiency, quality, timeliness and performance.
  • Provides a way to measure performance over time.
  • Helps make more informed decisions.

How To Set Effective KPI’s

In order to set effective KPI’s, we can use the SMART model.

  • Specific ― What is your desired outcome?
  • Measurable ― How will you measure progress?
  • Achievable ― Do you have the necessary recourses?
  • Relevant ― Is it aligned with your goals?
  • Time ― How often will you review your progression?

Summary

KPIs offer an effective way to measure and track a company’s performance through a variety of different metrics. They offer an ‘at a glance’ view of whether your business is succeeding or failing.

By understanding exactly what KPIs are and how to implement them properly, business operators are better able to optimize the company for long-term success.

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