Key Performance Indicator (KPI) Definition

A Key Performance Indicator is a measurable value that

demonstrates how effectively a company is achieving key business
objectives. Organizations use KPIs at multiple levels to evaluate
their success at reaching targets. High-level KPIs may focus on
the overall performance of the business, while low-level KPIs may
focus on processes in departments such as sales, marketing, HR,
support and others.
 Oxford's Dictionary definition of KPI: A quantifiable measure used to evaluate the
success of an organization, employee, etc. in meeting objectives for performance.
 Investopedia's definition of KPI: A set of quantifiable measures that a company uses
to gauge its performance over time.
 Macmillan's Dictionary definition of KPI: A way of measuring the effectiveness of an
organization and its progress towards achieving its goals.

1. What makes a KPI effective?

Now that we know KPI stands for key performance indicator it is only as valuable as the
action it inspires. Too often, organizations blindly adopt industry-recognized KPIs and then
wonder why that KPI doesn't reflect their own business and fails to affect any positive
change. One of the most important, but often overlooked, aspects of KPIs is that they are a
form of communication. As such, they abide by the same rules and best-practices as any other
form of communication. Succinct, clear and relevant information is much more likely to be
absorbed and acted upon.
In terms of developing a strategy for formulating KPIs, your team should start with the basics
and understand what your organizational objectives are, how you plan on achieving them,
and who can act on this information. This should be an iterative process that involves
feedback from analysts, department heads and managers. As this fact finding mission
unfolds, you will gain a better understanding of which business processes need to be
measured with a KPI dashboard and with whom that information should be shared.

2. How to define a KPI

Defining key performance indicators can be tricky business. The operative word in KPI is
“key” because every KPI should related to a specific business outcome with a performance
measure. KPIs are often confused with business metrics. Although often used in the same
spirit, KPIs need to be defined according to critical or core business objectives. Follow these
steps when defining a KPI:

 What is your desired outcome?

 Why does this outcome matter?
  How are you going to measure progress?
 How can you influence the outcome?

 Who is responsible for the business outcome?

 How will you know you’ve achieved your outcome?
 How often will you review progress towards the outcome?

As an example, let’s say your objective is to increase sales revenue this year. You’re going to
call this your Sales Growth KPI. Here’s how you might define the KPI:

 To increase sales revenue by 20% this year

 Achieving this target will allow the business to become profitable
 Progress will be measured as an increase in revenue measured in dollars spent
 By hiring additional sales staff, by promoting existing customers to buy more product

 The Chief Sales Officer is responsible for this metric

 Revenue will have increased by 20% this year
 Will be reviewed on a monthly basis

What is a SMART KPI?

One way to evaluate the relevance of a performance indicator is to use the SMART criteria.
The letters are typically taken to stand
for Specific, Measurable, Attainable, Relevant, Time-bound. In other words:

 Is your objective Specific?

 Can you Measure progress towards that goal?
 Is the goal realistically Attainable?
 How Relevant is the goal to your organization?
 What is the Time-frame for achieving this goal?

Being even SMARTER about your KPIs

The SMART criteria can also be expanded to be SMARTER with the addition
of evaluate and reevaluate. These two steps are extremely important, as they ensure you continually
assess your KPIs and their relevance to your business. For example, if you've exceeded your revenue
target for the current year, you should determine if that's because you set your goal too low or if that's
attributable to some other factor.

5. How to write and develop KPIs

When writing or developing a KPI, you need to consider how that KPI relates to a specific
business outcome or objective. KPIs need to be customized to your business situation and
should be developed to help you achieve your goals. Follow these steps when writing a KPI:
Write a clear objective for your KPI

Share your KPI with stakeholders

Review the KPI on a weekly or monthly basis

Make sure the KPI is actionable

It is a five-step process:

1. Review business objectives

2. Analyze your current performance
3. Set short and long term KPI targets
4. Review targets with your team
5. Review progress and readjust

Evolve your KPI to fit the changing needs of the business

Check to see that the KPI is attainable

Update your KPI objectives as needed

Creating good KPIs for your organization is an iterative process.

10 criterion to consider when designing key performance measures

1. Be based on quantities that can be influenced, or controlled, by the user alone or in
cooperation with others
2. Be objective and not based on opinion
3. Be derived from strategy and focus on improvement
4. Be clearly defined and simple to understand
5. Be relevant with an explicit purpose
6. Be consistent (in that they maintain their significance as time goes by)
7. Be specific and relate to specific goals/targets
8. Be precise – be exact about what is being measured
9. Provide timely and accurate feedback
10. Reflect the “business process” – i.e. both the supplier and customer should be involved in the
definition of the measure

Let's use Tesla as an example

Step 1: Tesla's One Metric that Matters is number of new cars delivered per quarter. This is a
hot topic for investors to measure their success.
Step 2: To build as many cars as possible, while still maintaining quality, Tesla needs to
balance their core assets from their balance scorecard.
Financially: They may make the decision that delivery of cars is more important than profit in
cars.
Customers: Customers have submitted their orders and are waiting for their delivery, the
longer it takes the less excited and more likely they will cancel. So keeping customers happy
is extremely important.
Step 3: Now that we have set some objectives with KPIs we need to set key results
One KR for customers that is a standard measure in supply chains could be: Deliver
performance (DP) is set at 90% measured as the fulfillment of a customer promised delivery
date.
Step 4: Using a KPI Dashboard to monitor key results
Dashboards often provide at-a-glance views of KPIs relevant to a particular objective or
business process.

KPI Dashboard
One of the most common uses cases of KPI dashboard tools are in startups who share their
core organizational performance measures to get alignment from all the employees. When
you walk around their offices, TV's will be placed near specific teams highlighting the results
in real-time such as number of support tickets resolved today or number of new wins.

Eg Klipfolio
Manged reports for clients and

Share dashboards and take action on insights

Take action and get results

What are key metrics in business?

Key metrics, also known as key performance indicators (KPIs), are integral to the success of your
business. Tracking them is how you measure your company's performance and gain insights that
help you boost your bottom line
 In practice, executives will focus on strategic performance and longer time periods of analysis
while operational efficiency metrics and KPIs have a focus on shorter periods.

A metric is important for multiple reasons:

 They reveal the true state of your performance: As we mentioned, performance is one of the pillars
of succeeding in our cutthroat business environment, and you need to identify what works and what
doesn't. By setting operational performance measures, you will know what is happening at every stage
of your business.
 They help in making the right decision: To ensure positive business results, data-enabled decisions
are critical. What are key metrics in this case enabling - is an environment that focuses on making the
right decision at the right time since they will present the data, and help you derive insights.
 They help you monitor the financial health: To safeguard the financial performance of your
company, monitoring financial metrics is essential. Every business needs to focus on finances, and by
doing so, you will have the opportunity to keep your cash flow steady and sustainable.
 They keep your operations on schedule: While there are metrics examples that focus on strategic
initiatives, as we mentioned, they will also help you in measuring day-to-day or weekly activities,
which, in turn, will help you in keeping your operations on schedule and optimize them to improve
results. Operations KPIs are the backbone of any successful business, and you need to focus on them
to ensure sustainable business development.

What Is An Operational KPI?

An operational KPI is a quantifiable value expressing the business performance in a shorter time-
frame level. They are used in different industries to track organizational processes, improve efficiency
and help businesses to understand and reflect on the outcomes.

Top 12 Operational Metrics Examples

While there are numbers of operational metrics to choose from, a company needs to be careful which
one will be of utmost importance and value. That being said, we will discuss operational metrics
examples that can be used in business processes and outline the most prominent ones, while
using business analytics tools as our invaluable assistance.

1. Marketing: CPC (Cost-per-Click)

The need to establish specific operational metrics and track their efficiency creates invaluable results
for any marketing campaign. Let's see this through an example.
The CPC (cost-per-click) overview of campaigns is an operational metric that expounds on the
standard pricing model in online advertising. While comparing different campaigns into the CPC
section of the overall strategy, you can easily spot which one had the lowest price and tackle deeper
into the details. While this marketing KPI is priceless when it comes to advertising, it should be
viewed in relation to other important operational metrics. Below in the article, you can find a holistic
overview of different kinds of KPIs that are used in standard marketing practice.

2. Marketing: CPA (Cost-per-Acquisition)

Another example we could analyze is the CPA (cost-per-acquisition) in correlation with the specific
marketing channel, as presented in the visual above. The CPA metric is even more performance-based
since it's concentrated on the price of acquiring a customer, not clicks made to a website. Using these
indicators to reflect on the outcomes of a campaign and establish future processes can be of invaluable
significance.

3. Retail: Order Status

In retail, every order counts and that's why it's important to track during shorter periods the status of
your orders, whether it's shipped, received, in the packaging process, or canceled. This kind of ad hoc
analysis will tell you whether you risk customer complaints if they never received their package, or if
you need to push up your supply chain game. In case of slow processing, you will immediately know
which part of your chain needs further adjustments and whether you need to expand your business in
case you don't have the operational means to follow the high amounts of orders. This is one of the
operating metrics critical for ensuring your customers are satisfied but it also gives you an idea of
whether your business is growing and if you need further assistance. Keep in mind that in case of
growing orders, you should be able to see revenue growth as well, and then connect these operations
KPI with strategic ones.

4. Retail: Sales by Region

One of the operations metrics essential to establish great sales processes, the total sales by region will
help you determine which locations have the best performance. This is one of the operational
excellence metrics that should be tracked both on an operational and strategic level since it's important
to know whether your sales activities bring results or you need additional adjustments. But let's focus
on operations.

If you track this operation KPI in shorter time periods such as daily or weekly, you will have an idea
of how your specific campaigns are doing and whether they continue bringing positive results.
Moreover, your sales managers will have better chances to optimize their future targeting and deliver
better performance. Speaking in more detail, you will have the possibility to evaluate which locations
perform the best, where your products are considered most valuable, and compare between locations
to understand what works and what doesn't. For example, if you see a certain spike on Fridays across
different states, you can investigate further and see if you can implement the same strategies in other
locations as well. Keep in mind the differences and particularities of each location.

5. Human Resources: Absenteeism Rate

Another example comes from the HR industry and considers the engagement of the employees. This
is an extremely important HR KPI since it concentrates on the main workforce actions needed to
establish a successful HR strategy - the number of employees calling sick, missing work, or skipping,
can tell the organization what kind of impact it will have in the long run.

This is one of the KPIs for operations that can directly affect the general well-being of your company
and it makes sense to compare with historical data to evacuate whether the absenteeism rate is specific
for one department or the company as a whole. That way, you will be able to incorporate measures
and improve the overall situation.

6. Human Resources: Overtime Hours

The workload of employees is an operational KPI that can impact the absenteeism rate, if the
workforce is understaffed and deals with higher amounts of pressure. This performance indicator
should be monitored in detail since it can be interpreted differently, according to the context (for
example, is the economic growth or high volume of orders causing overtime hours, or something
completely different?).
This is one of the metric examples that can also help in recruitment processes since you will know
what kind of atmosphere is present in the company and use this as an argument for hiring negotiations
with potential candidates. If you want to tackle deeper into HR topics, you can read our
comprehensive guide on recruitment metrics.

7. Sales: Lead-to-Opportunity Ratio

In this sales example above, the lead-to-opportunity ratio provides insights into the number of leads a
sales professional or manager needs to stay on target with revenue goals. Since this is the first part of
the sales funnel, you can easily spot which leads have turned into qualified ones and easily calculate
the ratio. It would make sense to dig deeper into the exact source of qualified leads so that you can
guide the marketing and sales team even better. To fully understand operational performance
indicators in sales processes, you can take a look at our comprehensive article on sales graphs and
charts.

8. Sales: Lead Conversion Ratio

One of the most important sales KPIs is the lead conversion ratio - it defines the number of interested
people that turned into actual paying customers - a magic sales number indeed. After finding your
baseline, you will understand how many leads you need to obtain for a healthy sales pipeline. If the
conversion rate is low, you can be sure that the pipeline and your target metric needs additional
adjusting.

9. Logistics: Delivery Time

A standard logistics KPI, delivery time, measures the time between an order is placed to be shipped,
and the moment it is delivered to the customer or the post office. The average amount will then show
you where you need to decrease these values and provide a base for specifying the exact time your
customers can expect their package. This is an important performance metrics template that you can
incorporate into your logistics operations in order to ensure the best possible performance of your
company and establish lucrative rapport with your customers.

10. Logistics: Transportation Costs

All the costs related to the transportation process can be seen in this example above: the order
processing, administrative costs, inventory carrying, warehousing, and, finally, the actual
transportation costs. This will help determine the average numbers and the distribution expressed in
percentage, a critical component of successful logistics analytics process optimization. The final goal
is to decrease the costs while maintaining a high-quality delivery process. Industrial operational
metrics such as the logistics ones will help you determine the health of your supply chain,
transportation, and warehouse performance.

11. IT: Total Tickets vs Open Tickets

The overall progress of the project is one of the top IT KPI to measure. When visualizing the overall
progress in the correlation of the launch date, the management can easily spot if there are issues
across the system. That's why it is also important to monitor the workload of staff and their deadlines,
as displayed in one of our key metrics examples above. Measuring the open tickets vs completed ones
can set benchmarks for the project management and help in the optimization of the overall ticketing
system.

12. IT: Average Handle Time

Another example from the IT project management function is the average handle time of tasks. It
helps in the process of monitoring planned projects, tasks, and/or Sprints. By evaluating each member
of the team, alongside the overall average handle time of tasks, you can easily spot if any deficiency is
occurring in the system, and, therefore, adjust accordingly. This is one of the metrics examples that
are critical for project managers as well as the whole team since you will have details about how well
people assigned to the project handle their workload.
CUSTOMER ACQUISITION COST
How much does it cost you to sign up a customer?

The CAC or Customer Acquisition Cost is a crucial management KPI for your business, both
for your company and for investors. It represents all the costs incurred to convince a prospect
to buy a product or service, and thus turn him into a customer. These costs vary greatly
according to your business industry and function – an online marketer will include all the
campaigns costs, while a SaaS company will add up the staff wages, the sales and marketing
costs. For subscription-based business models it is often recommended to cover back the
CAC within one year of a customer acquisition, or it will burn all your capital before you can
even depend on monthly recurring revenues.

A Marketing KPI (key performance indicator) is a measurable value used by organizations

to evaluate the impact of marketing activities while helping professionals to monitor the
success of different marketing channels to determine efficient budget spending strategies

ROI: How efficiently are you spending your marketing dollars?

Customer Lifetime Value: Are new customers profitable in the long-run?
Website-Traffic-to-Lead Ratio: How does your website convert?
Lead-to-MQL Ratio: How does the marketing qualify your generated leads?
MQL-to-SQL Ratio: Which requirements has the sales team for your leads?
Goal Conversion Rate: How well are you hitting your business objectives?
Average Time to Conversion: How fast your visitors convert?
Landing Page Conversion Rate: What pages and content are performing best?
Cost per Click: Are you getting the most bang for your buck?
Bounce Rate: Do your visitors find what they are looking for?
Engagement Rate: How well do users respond to your content?
Click Through Rate: Are your ads and content resulting in attention?

IT

An IT KPI or key performance indicator helps to keep track of all relevant aspects of
quality regarding an IT project. KPIs help deliver projects on budget and time by analyzing
and optimizing the IT ticket management, IT problem-solving and IT cost management.

Projects Delivered on Budget: Can you keep your budget within limits?
Average Handle Time: How do you keep your tasks under control?
New Developed Features: How many features do you continually develop?
Number of Critical Bugs: How many bugs do you regularly encounter?
Server Downtime: Do you know why and when downtime happens?
Mean Time to Repair: How efficiently you deal with unexpected events?
Unsolved Tickets per Employee: Do you monitor employee’s effectiveness?
Reopened Tickets: Are you handling your tickets efficiently?
IT Support Employees per End Users: Do you have enough IT support?
Accuracy of Estimates: Do you estimate your team’s time correctly?
IT ROI: How profitable are your investments?
IT Costs Break Down: Are you able to identify your costs’ breakdown?
IT Costs vs. Revenue: Do you compare your IT expenses to your revenue?
Team Attrition Rate: Do you manage to keep talented employees?

--------------------------------

Health care KPI

A healthcare KPI or metric is a well-defined performance measurement that is used to

monitor, analyze and optimize all relevant healthcare processes to increase patient
satisfaction. Many of these metrics are actually specific key performance indicators for
hospitals

Average Hospital Stay: Evaluate the amount of time patients are staying
Bed Occupancy Rate: Monitor the availability of hospital beds
Medical Equipment Utilization: Track the utilization of your equipment
Patient Drug Cost Per Stay: Improve cost management of medications
Treatment Costs: Calculate how much a patient costs to your facility
Patient Room Turnover Rate: Balance the turnover with speed and quality
Patient Follow-up Rate: Measure the care for your patients over time
Hospital Readmission Rates: Track how many patients are coming back
Patient Wait Time: Monitor waiting times to increase patient satisfaction
Patient Satisfaction: Analyze patient satisfaction in detail
Staff-to-Patient Ratio: Ensure you have enough staff to care for patients
Canceled/missed appointments: Keep track of patients’ appointments
Patient Safety: Prevent incidents happening in your facility
ER Wait Time: Identify rush hours in your emergency room
Costs by Payer: Understand the type of health insurance of your patients

A manufacturing KPI or metric is a well-defined measurement to monitor, analyze and

optimize production processes regarding their quantity, quality as well as different cost
aspects. They give manufacturers valuable business insights to meet their organizational
goals.

Production Volume: Track the quantities that you are able to produce
Production Downtime: Analyze and optimize your maintenance
Production Costs: Monitor the costs implied in the production
Overall Operations Effectiveness (OOE): Evaluate your operational efficiency
Overall Equipment Effectiveness (OEE): Assess the scheduled efficiency
Total Effective Equipment Performance (TEEP): Track overall effectiveness
Capacity Utilization: Maximize the use of your capacities
Defect Density: Track the damaged items right away
Rate of Return: Measure how many items are sent back
On-time Delivery: Ensure your products are delivered on time
Right First Time: Understand the performance of your production process
Asset Turnover: Acknowledge your assets in relation to your revenue
Unit Costs: Track and optimize your units costs over time
Return on Assets: See how profitable your business is relative to its assets
Maintenance Costs: Evaluate your equipment costs in the long run
Revenue Per Employee: Measure the success of your workforce

Digital media;

As an online publisher, or a blogger, you need to know which content is bringing a lot of
traffic so as to reproduce a potentially successful topic. This is why you need to track your
top articles and rank them by number of readers. Of course, the raw traffic figure doesn’t
speak for itself, and you should analyze it along other metrics – like the time on page, bounce
rate, conversion rates – so as to make sure that it is not “accidental” or that the title was not
misleading. A high traffic with an equally high bounce rate might tell you that the tagline was
catchy but that in the end, visitors didn’t find what they wanted there.

KPIs By platform

Facebook

A Facebook KPI or metric is a performance measurement that is used to track specific

details of a Facebook Fan Page, a specific campaign or shared content. These indicators
(Impressions, Reach, Engagement e. g.) define the value and success of your company on
Facebook.

Number of Fans: Is my number of fans actually important?

Follower Demographics: Where does my audience come from?
Page Views by Sources: How many people have seen my Page?
Actions on Page: What are people exactly doing on my Page?
Reach by Post Type: Which post type works best on Facebook?
Post Engagement Rate: How vital is my Average Engagement rate?
Click-Through-Rate (CTR): What is a good CTR for my Facebook posts?
Ad Impressions & Frequency: How are my ads performing over time?
CPM & CTR of Facebook Ads: How much my campaigns should cost?
Cost per Conversion: Where do you get conversions for the lowest price?

Others are twitter, you tube, linkedIn

Google analytics

A Google Analytics KPI is an objectively measurable performance indicator used to

monitor, analyze and optimize user behaviors on websites. Google Analytics metrics, among
other things, help website managers in the operationalization of their marketing goals.

Here is the complete list of the most important Google Analytics KPIs and metrics, that we
will discuss in this article in every detail:

Sessions and Users: How does the website traffic develop?

New and Returning Visitors: How often do users return to the website?
Bounce Rate: Are the visitors' requirements being met?
Goal Conversion Rate: Do visitors perform desired target actions?
Time on Page: How much time do visitors spend on a page?
Average Page Load Time: How important is the page speed, actually?
Bounce Rate by Browser: Are there issues with certain browsers?
Organic vs Paid Sessions: What is the share of organic traffic?
Average Session Duration: What is the quality of the generated traffic?
Top 5 Search Queries: What are the most common search queries?
Users by Gender: What is the gender and age distribution?
Pages per Session: How many pages are being visited on average?
Best Pages by Gender: What content has the most page views?
Top 10 Landing Pages: Which landing pages are most relevant?

A YouTube KPI or metric is an evaluative measurement tool used for video content
performance on the YouTube social media channel. It is based on defining the right factors
needed to establish successful content, essential for a lucrative social media video strategy.

Here is the complete list of the most important YouTube KPIs and metrics, that we will
discuss in this article in every detail:

Total Watch Time: How long have users watched my videos?

Total Amount of Video Views: Which videos are particularly interesting?
Viewer Retention: Are my videos captivating viewers?
Video Engagement: How do viewers react to my videos?
Number of Subscribers: How many subscribers have I gained or lost?
Daily Active Users (DAU): How many people are watching daily?
Traffic Source: Where does my Traffic come from?
Subscribers’ Demographics: Where do my subscribers come from?
Top 5 Videos by Views: What kind of videos resonates the best?