What is a 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.
You should have a KPI that you can measure in numbers and a target with a defined goal number.
Analyze your current performance
You can't get from point A to point B without understanding point A, your starting point. Dig into the data, allow yourself time for discovery, and provide an honest reckoning of your performance using a tool like PowerMetrics. This will give you the basis of setting your KPI targets.
The targets are interesting because they allow a more local, specific, and targeted lense through which to view each Goal. Indicators: Indicators help measure if the targets are being met. In order to do this, a tremendous amount of data needs to be collected.
Now that you understand the maximum of KPIs you should have, it's time to think about the 4 main components you'll need to consider when setting any KPI: its Measure, Data Source, Target, and Frequency. The KPI Measure clarifies what you want to measure and how you can measure it.
A key performance indicator (KPI) can have a target, which is the exact value that the KPI should achieve. It can also have KPI ranges, each of which is a span of possible values. Ranges can be specified either as a percentage of the target value or as an actual value.
But KPIs are NOT the same as goals. The goal is the outcome you hope to achieve; the KPI is a metric to let you know how well you're doing working towards that goal.
A baseline is the value of a performance indicator before the implementation of projects or activities, while a target is the specific, planned level of result to be achieved within an explicit timeframe (see ADS 203.3. 4.5).
At its most basic, target setting is the process of setting goals that are specific, measurable, attainable, relevant, and time-bound. It involves setting achievable objectives that are realistic and have clear deadlines. The purpose of target setting is to provide direction and motivation.
Target – an indicator established to determine how successfully you are achieving an objective. Goal – an indicator established to determine whether you have achieved your objective. AIM An aim is a purpose or the desired outcome, the vision for the business.
Key performance indicators (KPIs) are metrics that measure the performance of your organization against certain benchmarks. You can use key performance indicators to set goals and measure progress throughout the course of your business's life cycle.
SMART KPI examples are KPIs such as “revenue per region per month” or “new customers per quarter”. Iterate and evolve. Over time, see how you or your audience are using the set of KPIs and if you find that certain ones aren't relevant, remove or replace them.
Milestones are often used in business as inspirational stages that the company had planned to achieve in a determined period of time. However, a milestone itself is not usually considered a KPI, because it's not a proper measure per se, but it needs actual metrics to determine whether it has been achieved or not.
KPIs have a high-level perspective. They represent key business goals that are relevant for various departments. On the other side, metrics are considered lower-level indicators and they track activities or processes that are specific to a department or business area.
A smart goal is an ultimate outcome or result you want to achieve by accomplishing a set of activities. On the other hand, KPIs are metrics or indicators that tell you whether you're on track to achieve that goal.
SMART goals and KPIs
Goals aren't KPIs, but KPIs support your goals. Your SMART goal is the result you want to attain, and the KPI shows you if you're on the right track. Thus, used as part of your SMART goals, KPIs can be especially useful in the Measurement element of your goal.
Types of KPIs include: Quantitative indicators that can be presented with a number. Qualitative indicators that can't be presented as a number. Leading indicators that can predict the outcome of a process.
However, there are several characteristics that all successful KPIs share—they are specific, measurable, attainable, relevant, and time-bound. If you can make sure your KPIs meet these standards, you're on the right track to improving your sales performance.
Financial KPIs track the progress of financial aspects of the business toward its goals. Its examples include net profit margin, revenue growth rate, return on investment, liquidity ratio, working capital ratio, total expenses, cash availability, etc.
Common things Key Performance Indicators might track are: Revenue: average profits, total revenue, and new customers. Employment statistics: employee turnover, employee performance, and vacancies. Customer service: average call time, efficiency and customer satisfaction.
Today, I want to look at how we can set up good KPIs, metrics that drive both team and business growth. These KPIs always exhibit three key aspects: relevance, measurability and simplicity. Let's see what that means in practice.