What are KPIs? KPIs or key performance indicators are the metrics by which the company's fundamental initiatives, objectives or goals are measured. The keyword in the phrase is “key”, which means that they have a special or significant meaning. KPIs act as measurable reference points with respect to defined objectives. Key performance indicators (KPIs) are the critical (key) quantifiable indicators of progress towards the expected result.
KPIs provide an approach to strategic and operational improvement, create an analytical basis for decision-making, and help focus attention on what matters most. Basically, key performance indicators or KPIs measure performance or progress based on specific business goals and objectives. A fundamental element to consider is the keyword, which means that they only track what is really relevant to the company's strategic decisions. KPIs can be a calculation or a single value that summarizes a period of activity, such as “450 sales in the month of October”.
These KPIs can foster a better understanding of employee satisfaction or whether the IT department has the right staff. When creating yours, KPIs are made up of four key attributes and the result should be 5 to 7 clear KPIs for your plan. The relative value of a set of measures for business intelligence is greatly improved when the organization understands how different metrics are used and how different types of measures contribute to an idea of the organization's performance. Rather than being based on feelings or emotions, KPIs are statistically backed up and cannot discriminate between employees.
When choosing the KPIs and metrics you'll monitor, always make sure they reflect the truth. Metrics also record and provide data on the organization's standard business processes, but they are not the most important metrics that the organization must measure, monitor and use to move forward in relation to its strategic plan. For example, if new visitors to a website don't translate into downloads, if most of the downloads come from an email campaign, visits to the website are not a KPI, but just a metric. Custom metrics refer to indicators that may look good on paper, but are not useful to inform future business strategies.
KPIs can be comprised of a variety of different metrics that give you a complete picture of your or your team's progress toward a goal. KPIs vary from company to company, and some are more suitable for certain companies than for others. Metrics are quantitative measures used to track the performance of specific business processes at the operational and tactical levels. However, not all metrics are created equal and it can be difficult to identify which metrics are most relevant to your organization or area of operation.