KPIs

What is KPI?
• KPI stands for key performance indicator, a
quantifiable measure of performance over time for
a specific objective.
• KPIs provide targets for teams to shoot for,
milestones to gauge progress, and insights that help
people across the organization make better
decisions.
• From finance and HR to marketing and sales, key
performance indicators help every area of the
business move forward at the strategic level.
 Comparison of Metrics v/s KPI
• Metric is used for measurement of business
activity
• KPI measures performance against a goal.
• Goals associated with KPIs are known as
targets.
• Web analytics dashboard display important
information about website.
• Also displays Key Performance indicators(KPI) of
website against goals.
 Characteristics of a good KPI
• Business-aligned: KPIs should be aligned with
your overall business strategy and outcomes.
• Actionable: KPIs should be actionable. Once
you’ve set your KPI, you need to outline the
steps you’ll take to reach it and the metrics
you’ll measure along the way. What good is a
KPI if you have no way to meet it? If your goal
is to increase inbound leads, you should have
a plan in place to do that
 Characteristics of a good KPI
• Realistic: KPIs should be realistic. Good advice is
to start small. Big, lofty KPIs—while they might
look good on paper—aren’t doing you or your
team any favors if they’re unrealistic from the get-
go.
• Measurable: KPIs should be measurable. When
you set KPIs, ask yourself: What are you trying to
achieve? What is the desired end result? What’s
the timeline? Remember to add: How am I going
to measure my KPIs?
 Characteristics of a good KPI
• Drillable: Users can drill down into details
• Simple: KPIs should be simple, so that user can
understand.
 Measuring KPI-Using SMART FRamework
SMART refers to the five requirements your KPIs need to be good.
It’s an acronym for Specific, Measure, Attainable, Relevant, and Timeframe.

• Is your objective specific?

The KPI should have a clear and well-defined focus area. It should directly address a specific aspect of your
operations, like sales, customer satisfaction, or website traffic.
• Can you measure progress toward your goal?
The KPI should be quantifiable using objective data, like percentages.
• Is the goal realistically attainable?
The KPI has to be a parameter that you know you can realistically strive for in a given timeframe. Don’t
shoot for impossible numbers.
• How relevant is the goal to your organization?
The KPI should directly align with your business objectives and reflect an area that is critical to your
success.
• What is the timeframe for achieving this goal?
Is it for the month, quarter, or year? Setting a timeframe for your KPI can help you do comparisons
between periods, which allows you to track your performance and growth.
• Evaluate
Verify that goals meet the requirements of business.
• Reevaluate
Validate the sustainability and applicability of goals over time.
 Types of KPIs
• Strategic: These big-picture key performance indicators monitor organizational
goals. Executives typically look to one or two strategic KPIs to find out how the
organization is doing at any given time.
Examples include return on investment, revenue and market share.
• Operational: These KPIs typically measure performance in a shorter time frame,
and are focused on organizational processes and efficiencies.
Some examples include sales by region, average monthly transportation
costs and cost per acquisition (CPA).
• Functional Unit: Many key performance indicators are tied to specific functions,
such finance or IT. While IT might track time to resolution or average uptime,
finance KPIs track gross profit margin or return on assets.
These functional KPIs can also be classified as strategic or operational.
• Leading vs Lagging: While leading KPIs can help predict outcomes, lagging KPIs
track what has already happened. Organizations use a mix of both to ensure
they’re tracking what’s most important.
 How to develop KPIs
• The Balanced Scorecard Institute’s (BSI) Measure-Perform-Review-Adapt (MPRA)
framework is a disciplined, practical, and tested approach for developing and
implementing a KPI system.
• It gives organizations a way to systematically articulate a shared vision of what you are
trying to achieve, set practical goals, develop meaningful indicators that can be
managed and used for decision-making, and establish long-term discipline around
getting things done.
 How to develop KPIs
• Define how KPIs will be used: Talk to people who will be using the KPI report to find out what they
want to achieve and how they’ll use them. This will help you define KPIs that are relevant and valuable
to business users.
• Tie them to strategic goals: If your KPIs don’t relate to what you’re trying to achieve in your business,
you’re wasting time. While they may be related to a specific business function like HR or marketing,
every key performance indicator should tie directly back to your overall business goals.
• Write SMART KPIs: The most effective KPIs follow the proven SMART formula. Make sure they’re
Specific, Measurable, Attainable, Realistic and Time-Bound. Some examples include “Grow sales by 5%
per quarter” or “Increase Net Promoter Score 25% over the next three years.”
• Keep them clear-cut: Everyone in the organization should understand your KPIs so they can act on
them. This is why data literacy is so important. When people understand how to work with data, they
can make decisions that will move the needle in the right direction.
• Plan to iterate: As your business and customers change, you may need to revise your key performance
indicators. Perhaps certain ones are no longer relevant, or you need to adjust based on performance. Be
sure you have a plan in place to evaluate and make changes to key performance indicators when
necessary.
• Avoid KPI overload: Business intelligence has given organizations access to mounds of data and
interactive data visualization, making it easy to measure anything and everything. Keep in mind that the
key performance indicator definition refers to the most important targets. Steer clear of KPI overload by
focusing on the most impactful measures.
 Examples
• Every business unit has unique key
performance indicators that help them track
progress. Many organizations use KPI
dashboards to help them visualize, review and
analyze their performance metrics all in one
place. Here are a few KPI examples by
department, including a dashboard view of
each.
 IT Key Performance Indicators

• From support tickets to server downtime, IT key

performance indicators can help keep teams accountable
and alert them to any potential issues coming down the line.
• KPIs for IT teams could include targets like the following:
a)Total Support Tickets
b)Open Support Tickets
c)Ticket Resolution Time
d)Security Related Downtime
e)IT Costs vs Revenue
f)Reopened Tickets
 Marketing

• Get a handle on marketing spend, conversion rates

and other indicators of marketing success by clearly
defining key performance indicators and aligning
them with your organization’s strategic goals.
• Here are a few marketing KPIs to get you started.
a) Marketing Qualified Leads (MQLs)
b) Sales Qualified Leads (SQLs)
c) Conversion Rates (For Specific Goals)
d) Social Program ROI (By Platform)
e) Return on Ad Spend (ROAS)
 Customer Service
• Customer service leaders should track progress related
to customers, employees and finances. In addition, key
performance indicators should cover both short- and
long-term targets, including support response times,
customer satisfaction and others that help reach
service objectives.
a) First Contact Resolution Rate
b) Average Response Time
c) Most Active Support Agents
d) Cost Per Conversation
e) Customer effort score
 Sales
• Ensure your teams are meeting sales targets by
tracking and regularly reviewing sales key
performance indicators, including those for leads,
opportunities, closed sales and volume. Here are
some examples of KPIs for sales teams:
a) New Inbound Leads
b) New Qualified Opportunities
c) Total Pipeline Value
d) Sales Volume by Location
e) Average Order Value
 Finance
• From expense and revenue to margin and cash
management, finance managers have lots of
choices when it comes to tracking financial
progress. Here are a few examples to consider as
you define your own key performance indicators.
a) Gross Profit Margin (and %)
b) Operating Profit Margin (and %)
c) Net Profit Margin (and %)
d) Operating Expense Ratio
e) Working Capital Ratio
 References
• https://www.kpi.org/kpi-basics/kpi-development/
• https://www.qlik.com/us/kpi
• https://www.klipfolio.com/resources/articles/what-
is-a-key-performance-indicator
• https://www.investopedia.com/terms/k/kpi.asp