What is a KPI?

A key performance indicator is a measurable value that shows how effectively you’re
meeting your goals. Think of KPIs as your company’s scorecard, a way of measuring
whether or not you’re delivering on your objectives.

Why KPIs matter

Identifying and tracking KPIs lets you know if your business is on the right path—
or if you should change course to avoid losing valuable time and money. When used
properly, KPIs are powerful tools that help you:

Monitor company financial health.

Measure progress against strategic goals.
Spot problems early on.
Make timely adjustments to tactics.
Motivate team members.
Make better decisions, faster.
So how do you begin to identify the KPIs that are important to your business? Start
by clarifying your strategic objectives—collectively or by department.

These goals will help you identify which KPIs matter for your company. Picking KPIs
that are relevant will depend entirely on these objectives and the ability you have
to measure your performance against them.

Next, identify the KPI targets that you’re working toward, and how they’ll be
measured. Keep in mind that these could be both short- and long-term targets.

Talk to your team and encourage open dialogue about the KPIs and their targets. Are
they too aggressive? Too easy? Targets should be challenging, but if they’re too
far-fetched or rely entirely on metrics that your team doesn’t control, it would be
wise to revisit. You’ll also want to explore the activities and tactics your
company will use to achieve those targets. Lastly, take time to evaluate where you
are today—this will be your KPI starting point.

Get to know the different types of KPIs

Identifying which KPIs you should track becomes easier when you have a better
understanding of the types of KPIs that are most commonly used to measure progress.

Quantitative KPIs are all about measurable facts that can be represented with a
number. Think stats, percentages, and dollar signs.
Qualitative KPIs involve human interpretations and can’t be quantified with
numbers. Think opinions, feelings, and experiences.
Lagging KPIs measure what’s already happened in the past to predict success or
failure. Think of looking back at what you’ve already accomplished, or where you’ve
struggled.
Leading KPIs measure performance to predict future success and long-term trends.
Think of looking forward to where you’re headed.
Leading and lagging KPIs are commonly used together. Along with quantitative and
qualitative KPIs, they’re a good place to start.

For each KPI that you choose to track, assign an owner and agree on tracking
frequency. Whatever KPIs you decide to track, using a KPI platform or tool is key
for collaborating with your team on KPI definitions. By collectively defining each
KPI, then capturing contextual data and unifying it into a single view, you enable
spot-on, real-time actions.

KPI dashboard examples

Effective KPI dashboards bring together all the KPIs you need to track your
strategic goals, establishing a visual representation of all your relevant metrics
side by side, in one place. Take a look at these KPI dashboard examples and
consider some of the key associated metrics you’d likely want to track:

Marketing effectiveness
Keyword performance
Average time on page
Conversion rate
Average lead score
Website traffic lead ratio
Customer service
Customer satisfaction score
Cost per call
First response time
Customer retention rate
Average resolution time
Financial health
Profit and loss
Current ratio
Operating cash flow
Burn rate
Vendor expenses
IT performance
Mean time to repair
Server downtime
IT ROI
Unsolved tickets per employee
Projects delivered within budget
KPI reporting
KPI reports take the information presented on the KPI dashboard to a new level.
They go deeper into the data to pull out more detailed insights and analysis.

A KPI report helps stakeholders and team members identify trends or bottlenecks
over a specific time period, so that they’re able to make better decisions.
Reporting topics could include:

Insights into the company’s day-to-day operations.

Financial health of the company against targeted KPIs.
Notable trends or patterns presented by the data.
Deeper analysis of the data to assist with strategic decision-making.
To create your KPI report, first determine your audience and the objective for the
report. For example, you might want to show company stakeholders Q3 progress toward
your revenue target. Make sure that all the KPIs featured in your report point back
to that central theme.

Additional considerations for creating your KPI reports include:

Exploring KPI report templates that may be already included in your KPI tool or
platform.
Setting a cadence for reporting frequency.
Deciding whether your report will be static or interactive, for more dynamic
drilldowns into data.
Presenting only the relevant KPIs so you don’t overload the report with KPIs that
don’t map back to the reporting goals.
Making sure your reporting is clear, easy to understand, and actionable for the
intended audience.
KPI best practices
To help you successfully harness the power of KPIs, we’ve compiled a few tips to
get you started.

Identifying KPIs:
Only pick KPIs that are aligned to your specific goals. If your objectives aren’t
clear, matching KPIs against them will prove complicated.
Use different KPIs for the same goals if they stretch across departments—for
example, the marketing department will have different KPIs than the sales team.
Make sure that for whatever KPIs you pick, there’s a core team responsible for
defining them.
Monitoring KPIs:
Explore the different dashboards, visualization charts, and templates available in
your KPI tool or platform to select the right ones for your goals.
Make sure to include starting data for comparison, so that your dashboard shows a
true representation of company performance and progress over time.
Determine a cadence for monitoring and acting on KPIs. Are KPI dashboards monitored
daily or weekly? Do actions only come after reporting or are stakeholders and/or
team members empowered to adjust tactics along the way?
Be sure you have simple, end-to-end data protection for data dashboards, with
controls for sharing outside the organization.
Common KPI mistakes
Avoid these common KPI mistakes:
Selecting KPIs that aren’t key to your strategic goals. While it’s smart to track
your relevant business metrics, not all of your metrics are worthy of KPI status.
Adopting poorly defined or vague KPIs. Collaborate with your team to define the
KPIs with specific details on how they’ll be measured. If you don’t, you’ll
struggle to meet your goals.
Setting lofty or unrealistic KPI targets. It’s better to set more realistic targets
based on historical data, resources, and current tactics. Consider focusing on a
specific timeframe or set short- and long-term targets.
Tracking KPIs without owners. Accountability matters, not just for the results but
also for the process. Each KPI should have an owner responsible for monitoring,
reporting, analysis, and action.
Failing to take action on your KPIs. Whether you’re meeting your goals or falling
behind, KPIs are tools to help you make better decisions. So don’t track just for
tracking’s sake—take action.