If you ask Curious George to define KPIs, his answer would either be “Number of bananas eaten in a day” or “Oo, oo, oo, Ah! Ah! Ah!”. Unfortunately, things can get a little more tricky in the world of business. KPIs can differ dramatically between company roles, teams and responsibilities, so there’s no shame in seeking a bit of help establishing them. This guide will brief you on everything you need to know about KPIs, throwing in a few examples for good measure.
But let’s start simple. What are KPIs?
What is a KPI?
While it sounds like the name of a frat house, KPIs don’t have much to do with Greek life. KPI is the acronym for Key Performance Indicator, a metric for how an individual, organisation or business progresses on their goals. In practice, KPIs judge development on a particular project or objective.
KPI definition in business
In the context of business, KPIs are used to show how well an organisation is performing.
But while this is one key performance indicators definition, the purpose of KPIs spans much further. Key performance indicators in business are just as much about progress as they are the end goal. Organisations of all sizes use KPIs as a health check — but also to hold teams accountable and keep teams aligned.
Note we’re saying KPIs, not KPI, and that’s because KPIs are more effective collectively than individually. Think of it like this — when you go for a blood test, your doctor measures the nutrient levels in your blood. B-12 levels alone don’t say much about your overall health, but if there are deficiencies across the board, that tells a bigger story.
It’s the same in business — falling short in sales is concerning, but underperforming on social media, email and paid marketing paints a picture of a deeper issue. The full scope of key performance indicators provides the knowledge needed to make more strategic decisions.
What are the benefits of using KPIs in your business?
There’s an endless list of organisational and personal advantages of using KPIs in your business, but they can boil down to four main perks.
1. Accountability
Accountability isn’t about micromanaging or playing the blame game — it’s about taking ownership over your responsibilities and rewarding hard work. Key performance indicators track team and individual performance, providing more clarity across an organisation.
2. Flexibility
An organisation that doesn’t measure progress or success is vulnerable to wasting time on a strategy that isn’t working. KPIs put everything out in the open, providing the opportunity to pivot if one approach isn’t productive.
3. Collaboration
One of the biggest challenges in business is effective teamwork. KPIs encourage individuals and teams to work toward a common goal and measure achievements collectively. They align each person working on a project by establishing a baseline of priorities and expectations.
4. Tracking
KPIs are a business health check — they allow businesses to see how they’re performing. With weekly check-ins and quarterly check-ups, KPIs can effectively track performance in any department.
How to write good KPIs
If you were to search for ‘KPIs examples’ online, you’d sift through hundreds of vague 3-word metrics that may or may not make much practical sense. One impactful way to approach KPIs is through the SMART framework.
SMART stands for Specific, Measurable, Achievable, Relevant and Time-bound. But what does that mean in the world of KPIs?
- Specific — Does the KPI accurately define what you want to achieve?
- Measurable — Is there a way to measure success?
- Achievable — Is the KPI within reach?
- Relevant — Does the KPI fit in with wider organisation goals?
- Time-bound — Does the KPI outline a start and end point?
Following this structure, a generic KPI like ‘conversion rate’ becomes ‘Improve EDM conversion rate by 5% by July 1’. The SMART KPI is more actionable and clearly defined. If you want to learn more about the SMART framework, you can find many examples of SMART goals for work online.
What are some examples of KPIs?
If you’re looking for some inspiration, you’ve come to the right place. Here are some examples of SMART KPIs across different departments and industries.
Customer success KPIs examples
- Reduce average response time from 5 minutes to 3 minutes
- Achieve 50 reviews with >4.5 stars by May
- Grow NPS from 35 to 50 by the EOFY
Marketing KPIs examples
- Reduce cost per lead from $5 to $1
- Improve landing page conversion rate by 5% by December
- Increase engagement with Facebook ads by 10% this month
Sales KPIs examples
- Increase gross profit margin by 30% this quarter
- Improve ARPC by 20% by October
- Increase monthly recurring revenue to $100k
HR KPIs examples
- Reduce overall overtime hours by 50% this quarter
- Reduce monthly training costs from $5,000 to $3,000
- Receive feedback from 100% of staff members by June
IT KPIs examples
- Reduce average ticket completion time by 10% this month
- Reduce phishing email open rate from 10% to 3%
- Grow disaster recovery sites from 2 to 5
How to report on KPIs
Traditionally, companies report KPIs quarterly. The easiest way to track them is with an online dashboard that managers can share with their team. You’ll find no shortage of KPI software online to help you keep track of them.
However, while we at Tability appreciate the value of KPIs, we like to elevate performance using another tracking method called OKRs. What are OKRs? The Objectives and Key Results (OKRs) framework is a goal-setting methodology that both measures and strengthens business progress.
That being said, there’s no harm in keeping your KPI software alongside your OKRs software. It’s actually easier to create OKRs if you have a clear set of KPIs. Using OKRs, your SMART key performance indicators become your key results, deriving meaning from a business objective that changes as often as quarterly.
Read more about the similarities and differences between OKRs and KPIs, or try your hand at creating your first OKRs plan using key performance indicators with a free trial of Tability.
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