KPIs have become a trendy topic to discuss in the world of business. Many new tools of measurement are released on the market all the time. So, professionals have started implementing them in their organizations.
This phenomenon has most often been associated with the world of business. Yet, KPIs can be used by many different organizations, departments, and even individuals. You may have used them before without even noticing or knowing what they are. Thus, this article will give you an introduction to what KPIs are. Also, how professionals use them for the benefit of companies around the world.
What are KPI’s?
KPI is the abbreviation of Key Performance Indicator. The term refers to a specific type of performance metric. It accesses the progress of projects, programs, products and other initiatives. KPIs are specific to the industry and organization and highly detailed. KPIs inform us about how the company or department performs in relation to its goals. They give a clear picture of the present and whether the business is in its desired state.
The basis of KPIs is matching the business objectives of a company to its key internal processes. Different departments may have their own KPIs, within their work in the organization. Yet, it is always important to consider the company’s goals.
KPIs need to be tracked over time. Doing this a marketer can observe trends. Further, they can make comparisons of the company’s performance in different stages. Often KPIs are collected and displayed together in different types of dashboards. This helps to read them and find the correlation between them. Moreover, it helps in distributing them to all stakeholders.
KPIs prove to be effective because they can be adapted to the strategic goals of the company. Moreover, they can be personalized to the direction of the organization’s development. In other words, they are dynamic and adaptable.
What is the difference between goals and KPIs?
KPI’s are often mistaken with goals or other business metrics.
When working in this field, it is important to separate strategic goals and KPIs. Goals are what you aim to achieve after a given amount of time. KPIs however, are the hard facts – the numbers at the end of a mathematical formula.
How many do I need to track?
In today’s digital world, the amount of data received by companies every day is endless. However, not all of it is relevant for your success, but merely a distraction you will need to cope with.
Defining your company’s critical success factors is essential to working with KPIs. A common mistake is to track too many or little aspects. You need to ask yourself what it is you want to achieve. Moreover, which are the most important factors leading to your success.
If you define them incorrectly, you will waste time, money and effort. You will have a focus on aspects who have no influence on your performance. Yet, if defined correctly, KPIs can vastly improve the state of your business.
How to measure KPI’s?
KPIs are metrics that need to be checked often. You need to collect data on equal intervals especially in their early days. Companies tend to often change their goals in this period, as well as what is key to achieving them.
The fact that you calculate them from realistic and current data makes your goals more agile. Measuring them in such a way can make your actions more proactive, as you will no longer have to act on past events. You will have the power to make corrections in your company’s path forward.
Why are KPIs important?
Now you already have an idea of what KPIs are and their purpose. Yet, you might be wondering why it is so important to use them. Why can’t you follow the organic processes in your company?
There are many reasons why KPIs are important factors companies can use in their growth. First, KPIs help organizations define what success looks like for them. Moreover, they provide an understanding of the company’s position. They point at the key aspects on which managers need to focus on.
KPIs help make the organization more transparent and cooperative. They can help accomplish better management of employees. Everyone in the team will be informed about the common goal and be accountable for reaching it.
Not convinced yet? Here are some examples of KPIs and their use in different departments.
How different departments use KPIs?
One of the most important things about KPIs is that they are specific, easy to track and can be adapted in real-time. Otherwise, it is of no use. So, it is important that a KPI reflects the actual performance. This way the individual or group has a real chance of influencing their KPIs.
To find the right KPI’s in your department, you need to ask yourself what is it that you want to achieve. Do you want to increase the revenue, decrease the costs, or work on the customer’s satisfaction? Moreover, what actions are you willing to take in order to do so? From which sales do you want this extra income to come from? Which costs are you aiming to decrease? Do you want to increase the overall customer satisfaction? Or maybe their experience with a certain product or service?
In the infographic below, you will see examples of frequently used KPIs. They are divided into the different departments a company can have. You need to use those examples as what they are – mere examples to inspire you to find out what fits your company’s needs.
We hope this article has given you an understanding of the basics of KPIs and why it is important to track them. You can find more articles on the topic in our blog or follow us on our social media channels for more updates on the topic.