What is KPI

What is KPI, and why is it crucial to your success?

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What is KPI?

KPI is an acronym that stands for Key Performance Indicator. A key performance indicator, or KPI, is used to measure the success of a business goal over time. You can measure it in almost any industry (i.e., service, manufacturing, education), and it’s often necessary to define one to quantify your progress toward achieving your business goal.

KPI doodle

Why is it important to know your company’s KPIs?

Knowing your company’s critical measurements is necessary to set measurable goals and recognize how close you are to meeting them. Identifying the proper KPIs can help your business develop better products, improve customer service, speed up fulfillment time, expand into new markets or increase sales.

Identifying KPIs for your company isn’t always easy. A lot of companies have to work from the bottom up, making changes as needed. It’s a process to find KPIs that accurately reflect your company and its goals. Once you find the right KPIs, however, it can be beneficial for helping focus on where results are lacking and identifying trouble spots.

KPI examples.

As an example, let’s say you own a company that produces clothing. One of the company’s goals is to increase sales by 20 percent over last year. Let’s further say your company measures its progress toward this goal by selling more sweaters than it did during the previous year. If you sold 5,000 sweaters last year and want to sell 6,200 this year (a 20 percent increase), you’d use the sweater sales as one of your KPIs.

To make this KPI more helpful, you would likely look at other factors affecting or impacting your goal. How many sweaters are in stock? What’s the ratio between men’s and women’s clothing? Are there enough employees on hand to meet demand? How can you encourage customers to be more receptive to your sweaters?

Each of these questions can help identify potential issues that may cause you to miss your goal or not reach it. If you discover the ratio between men’s and women’s clothing is out of balance, for example, you might adjust staffing levels by hiring another employee.

How to create your company’s KPI?

Your company’s KPIs should be easy to understand and clear enough that all employees know the target. They should also provide a realistic road map for achieving your goals. Some companies struggle with how to create their KPIs, but there are some basic guidelines you can follow:

Don’t set an unrealistic KPI or objective; it will only discourage you.

Your company's KPIs should be easy to understand and clear enough that all employees know the target. #KPI Click To Tweet

Please don’t use a single KPI to measure an entire business or product line; it won’t be accurate or valid. The more data points you collect, the more complete your picture of performance will be. If possible, track KPIs every month and review them regularly. The reviews should include questions such as “What went well last month?” and “What needs improvement this month?”

It’s also important to understand what kinds of KPIs are most beneficial for your company. For example, is it more helpful to track how many widgets you produce or how much money they bring per hour? Is there a difference between the number of people who use your service per month and the number of people who pay for it per month? You can answer these questions by knowing your business KPI.

What are SMART KPIs?

In general, the best KPIs are specific, measurable, actionable, realistic, and timely. These types of measurements are known as SMART KPIs.

  • Specific – Your KPI should be very defined explicitly so that you can monitor results closely and determine when they’re achieved.
  • Measurable – A good KPI can be tracked and measured. For example, if your KPI increases sales by 20 percent, you should follow the number of sales each month and then compare it with sales from previous months.
  • Actionable – The best KPIs provide specific guidance on what needs to be done to meet goals. For example, if you track the number of sales each month, it’s much better to know which months are low or high than just seeing an overall increase. You can then determine where your efforts need to be focused for increased results.
  • Realistic – Your KPI needs to reflect what you can actually accomplish given all the constraints and factors at play. For example, if your KPI increases sales by 20 percent and you think that’s a realistic goal given the market conditions, you should meet it. However, if you’re in an industry with 10 percent growth, your current performance could be much lower than expected.
  • Timely – As with other KPIs, timely data can help you and your employees understand what’s going on and where you should spend time and effort.

For more information on SMART goals, please click here.

How to measure your KPI?

The best way to figure out if your KPI is working is to measure it continuously. Think about the KPIs mentioned above, for example: Is your staffing level appropriate compared with demand? If you notice a high number of customers walk away without making a purchase, then you might be understaffed and need an additional employee.

The best KPIs also let you know what changes should be made to reach your goals. If sales are high but return rates are high, then it’s no longer a good KPI. You might need to brainstorm ways to lower return rates or encourage more people to buy online.

Whether you’re measuring the success of an individual project or an entire business, you need to determine what the best KPIs are. Simply tracking numbers isn’t enough; you also have to consider how those numbers affect your long-term goals and strategy.

Whether you're measuring the success of an individual project or an entire business, you need to determine what the best KPIs are. #KPI Click To Tweet

Make sure that all of your goals and objectives support a more critical company goal or vision. For example, if sales are rising but customer retention is falling, it’s good to look at improving customer retention. Your overall vision should guide your measurements and help you understand the best KPIs for maximizing success over time.

Types of key performance indicators

There are six main types of KPIs:

Key performance indicators for human resources.

These types of KPIs measure how well employees are doing their jobs. Specific types of KPIs for employees include:

  • Time management (by person, team, or department)
  • Communication (by person, group, or department)
  • Productivity (by person, team, or department)
  • Organizational skills (by person, team, or department)
  • Customer satisfaction (an overall KPI for all employees to track the company’s relationship with customers) 

Key performance indicators for sales. 

These types of KPIs measure sales results and include:

  • Sales growth (by person, team, or department)
  • Sales by product or service (an overall KPI for all sales employees to track each product’s, service’s, customer type’s, etc. performance)
  • Profitability (by person, team, or department)
  • Customer satisfaction (a KPI to measure the company’s relationship with customers)
  • Market share (a KPI to help track the company’s position in the market)

Key performance indicators for marketing.

These types of KPIs measure marketing results and include:

  • Leads generated (by person, team, or department)
  • Social media marketing success
  • Monthly traffic or visits to the website
  • Effective use of search engine optimization (SEO)
  • Cost per lead or cost per sale

Key performance indicators for customer care.

These types of KPIs measure customer care results and include:

  • Customer satisfaction (an overall KPI for all customer service employees to track the company’s relationship with customers)
  • Cost per call or cost per email sent
  • Timely response to inquiries and complaints
  • Customer retention (a KPI to measure the company’s relationship with customers)

Key performance indicators for finance. 

These types of KPIs track financial results and include:

  • Profitability (by person, team, or department)
  • Cash flow (an overall KPI for all finance employees to track the company’s liquidity)
  • Return on investment (ROI vs. competitors for specific campaigns or marketing campaigns, projects, etc.)
  • Capital expenditures (a KPI to track the company’s spending habits)

Key performance indicators for production.

These types of KPIs measure production results and include:

  • Quality (an overall KPI for all employees to track high-quality products)
  • Manufacturing capabilities (a KPI to monitor the company’s ability to keep up with customer demand)
  • Cost-effectiveness (per product or customer)
  • Procurement costs (cost savings)
  • Quality assurance (a KPI to track product reliability)
  • Industry benchmarks (an overall KPI for all production employees to track the company’s position in the industry).

How can you use metrics to make better decisions?

Knowing all of your company’s key performance indicators allows you to make better decisions about improving revenue, reducing costs, attracting new business, etc.

For example, knowing that the average customer calls three times before making a purchase can help you improve customer service by training employees to ask probing questions at the first point of contact.

Or knowing that your competitors have a larger social media following than you do might inspire you to allocate more resources to your own social media presence.

By identifying which metrics to track and measuring them over time, KPIs help you create a better business.

Tips for selecting which metrics to focus on (overall performance vs. more specific details) and why?

When choosing which performance indicators to track, it’s essential to be both specific and selective.

Start with the most crucial metrics that you want to track for your industry or area of focus.

Pick KPIs that help you measure overall progress toward company goals.

For example, if one of your primary objectives is to increase sales, it would make sense to look at sales goals (e.g., quarterly targets for new sales) and sales growth rates (the percentage change between quarters).

Second, think about the key processes that support your company’s goals.

Do you want your employees to focus on accuracy, speed, cost savings, or efficiency?

Then choose KPIs that can help monitor those specific processes.

For example, you might track the percentage of sales completed within a specific period, or the number of customer service calls resolved promptly.

Third, think about what happens to your company’s performance as a result of those processes.

Do you want your employees to focus on revenue, expenses, time management, or customer satisfaction?

Then choose KPIs that can help measure those results.

For example, you might track the amount of money saved due to your purchasing process or the percentage of customers who report being satisfied with their experience due to your customer service efforts.

Fourth, think about the most critical factors that impact your company’s performance.

Do you want to monitor changes in customer satisfaction, employee morale, or production costs?

Then choose KPIs that reflect those factors.

For example, you might track your employees’ average commute time to see if it increases due to traffic jams around the office.

Fifth, think about the most crucial elements of your company’s objectives.

How can you measure whether or not a process is generating results?

For example, you might track the number of new customers your marketing campaign brings in or the percentage increase in sales from a specific product line to see how it impacts your overall performance for the year.

Finally, when you choose the specific metrics to use, think about what information will help you report on your company’s performance.

For example, you might track the percentage of completed sales or the hours required to complete a production run.

Either way, make sure your company’s key performance indicators support your overall goals and objectives. If not, rethink which metrics you’re tracking and why. For better decisions, choose a few KPIs that will help move your business forward.

What is a KPI dashboard?

A KPI dashboard is an online tool that provides a real-time view of key performance indicators and key figures.

It’s like a GPS giving you directions based on your current location and destination.

In the same way, KPIs provide you with actionable information about where your company stands with its goals.

KPI Dashboards give you a bird’s-eye view of your company’s performance and what needs to change for you to reach your goals.

They’re powerful tools that link current performance with desired future outcomes.

Great KPI Dashboard tools for small businesses.

Since the changes you make when using your KPI dashboard will improve your business, it’s good to visually design and post the data using a KPI dashboard for small businesses.

To get started, identify the KPIs that will help you assess how your company performs and which ones should be included in your online dashboard.

Next, create a layout that includes charts, graphs, tables, and other data-based displays to show your results clearly and attractively. Then share the KPI dashboard with key stakeholders in your company. To help them make decisions about improving your business results.

There are several tools for creating a simple, accessible, and effective KPI dashboard for small businesses.

Here are some great options:


It’s a great, free option for creating an effective KPI dashboard.

The site’s features allow you to include graphical representations of your data and even allow you to share your results with others.


Provides a range of dashboards that you can set up to monitor different critical business metrics.

They also offer a free trial period for new users who want to try out various dashboard layouts.


It’s a dashboard application that can be run from any browser and provides a range of customizable options to ensure your results are reflected in the final reports.

Geckoboard plans start from $35 a month for a single dashboard, but you can purchase a free 14-day trial if you want to make sure it’s suitable for your business.


What future trends can be expected in this field?

As technology advances, new ways of monitoring company performance are being developed.

For example, companies have begun to use sensors-based systems that provide real-time information on the environment around them.

This includes updates on supply chain conditions, transportation issues, workforce safety, and more.

The next step will be to use this data to make better decisions during the planning stages of any project or production run, which will help to improve performance and reduce rework.

These technological advances are an effective way to keep businesses on track with their goals and objectives.

This is large because data-based information gives companies more detailed information about what’s happening now that can be used for future decision-making.

So, looking at the future, new developments in technology will enable companies to use more data-driven information to predict future events and plan accordingly to avoid issues before they even happen.

This means that instead of reacting to things that have gone wrong or trying to fix something after it has already happened, businesses will be able to use data to keep ahead of future problems or issues.


The use of data-based information will become increasingly crucial to business planning in the future, which means tools like KPI dashboards will be more useful than ever before.

By using KPIs effectively, you can help employees make better decisions that lead to better performance for your business, which leads to better results overall.

Since KPIs are an essential factor in successfully running any small business, it’s worth taking the time to create and implement a data-based monitoring system that everyone in your organization can use. Doing so will ensure better visibility into your company’s performance and allow you to make changes for future success.

Give you a clear idea.

Having a good understanding of what makes up your company’s KPI system can be crucial to improving overall productivity and helping employees achieve their goals.

These measurements give you a clear idea of where your company stands concerning its competitors and help you identify areas for improvement that would bring positive changes to the business overall.

KPIs are also often used as incentive systems within organizations. They play an essential role in keeping employees motivated and willing to go the extra mile for their companies.

This is because it provides them with a clear idea of how well they are meeting specific goals and objectives, which means that if they wish to receive raises or bonuses in the future, they will have to work towards improving their performance.

The big picture.

So, looking at the big picture, KPIs help managers do their jobs better by giving them information about the performance levels of their employees, which they can then use to help others meet their goals.

These measurements are essential because managers use them to maintain a healthy working environment for all employees and stay on track with company plans.

Having an effective KPI system in place is the key to being an effective manager. This means that when you help create and implement a data-based monitoring system for your business, you’ll be performing an essential role in its success.