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What Are Key Performance Indicators (KPIs)?

12 Types of Key Performance Indicators

5 Examples of Key Performance Indicators

How to Develop KPIs for Your Business

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What Are Key Performance Indicators (KPIs)?

Key Performance Indicators (KPIs) are quantifiable goals intended to measure the
scope or potential of a company’s success or attainable business objectives. These
performance measurements can help indicate which components of your business
are the most beneficial to its progress, which ones can help optimize its performance,
or which areas of your company may need work.

KPIs, sometimes called KSIs (or key success indicators), should be quantifiable
metrics that can be measured regularly to chart the success of a project or a
business’ operation as a whole. They can apply to any element of your business, from
marketing to customer service, to employee satisfaction, to financial health.
Understanding KPIs: 12 Types of Key Performance Indicators - 2024 - ... https://www.masterclass.com/articles/key-performance-indicators-explained

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12 Types of Key Performance Indicators

There are a variety of KPIs that can help measure the performance or progress of
your business. Some types of KPIs include:

1. Quantitative indicators: Quantitative indicators are represented by

continuous or discrete numbers, which can be ratios, percentages, or whole
numbers that represent values like rating scales, dollars, or weight. These
indicators are the most straightforward quantifiable measures of performance, as
they present direct numerical values.

2. Qualitative indicators: These indicators are not expressed numerically but

through feelings or opinions. An employee satisfaction survey can be an example
of qualitative data where performance is based on feedback.

3. Leading indicators: Leading indicators are variables that can help identify
long-term trends and possibly predict successful future outcomes of your
business processes.

4. Lagging indicators: Lagging KPIs compare a business’ current performance

in a particular field with their past performance in the same field.

5. Input indicators: Input indicators are a type of KPI that track the resources
necessary to produce the intended outcome, such as funding or extra staff. Input
indicators can help companies keep track of how efficiently they are using their
resources.

6. Output indicators: Output indicators measure the success or failure of your

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business activities, like the number of goods or services created through a

particular process. Revenue growth and new customer acquisition also indicate
how well your business is performing.

7. Process indicators: Process indicators represent the efficiency of a

business’s process and how effectively it is functioning.

8. Practical indicators: Practical indicators explore the function of an existing

process at a company, usually involving observation or feedback on that process.

9. Directional indicators: Directional indicators help determine the company’s

success in comparison with competitors, while practical indicators are specific to
the company’s process within itself.

10. Actionable indicators: Actionable KPIs measure a company’s ability to

enact change whether through political action or a shift in company culture.

11. Financial indicators: Financial indicators are a marker of a business’s

monetary growth and stability. When paired with other KPIs, this indicator can
help paint a more complete picture of your company’s financial viability.

12. Outcome indicators: These indicators are a marker of whether the program
is meeting its goals via the short or long term.

5 Examples of Key Performance Indicators

KPIs will target different areas depending on how they want to grow. Some KPI
examples include:

1. Customer KPIs: Customer KPIs demonstrate your business’ relationship with

their customers and vice versa. An example of a customer KPI is customer
retention, which is the concept of turning existing customers into repeat
customers who continue to purchase from your company instead of turning to
competitors. You can also use tools like net promoter scores which survey a
number of customers and see how likely they are to recommend your business to
someone else.

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2. Operational KPIs: Operational KPIs can help a business measure how

satisfied their employees are at their company. Employees who are dissatisfied
may cause a higher employee turnover rate, which means more money your
business spends on training new employees.

3. Financial KPIs: Financial KPIs can help you measure the profitability or
financial health of your company. Things like net profit margins, gross profit
margins, accounts receivables, and inventory turnover rate are some of the best
KPIs studying how your business uses its resources, leading to smarter money
management.

4. Marketing KPIs: Monthly website traffic, qualified leads, and call-to-action

conversion rates can demonstrate how your company’s marketing campaigns are
either succeeding or failing. These KPIs can inform your marketing team how to
build upon or improve their current strategy.

5. Sales KPIs: Lead-to-sale conversion rates can be a good indicator of how

effective your sales funnel is working. Additionally, a KPI like customer lifetime
value will give general insight into how much money a customer is expected to
spend with your business in their lifetime.

How to Develop KPIs for Your Business

Establishing good KPIs for your business can be a game-changer. For how to develop
KPIs, see the list below.

1. Consider your overall goals. Choosing the right KPIs to measure progress
for your business can take some time to figure out. Think about your business
model and the goals you wish to accomplish.

2. Establish a metric and a way to measure it. Every KPI involves a

quantifiable metric that can demonstrate performance and a way of measuring
that trait. If your goals are customer-related (like increasing foot traffic), choose
something that indicates your company’s performance in that area (like in-store
visits), and establish how you will measure it (like in-store sales). Once you’ve

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 done your research and figured out your own business needs, pick the KPIs that
will fit neatly into your vision.

3. Decide on a time frame and reporting frequency. Your company may have
an annual KPI—like year-over-year growth—or a KPI tied to the flight of a
marketing campaign. Establish a time frame that you will be measuring for the
KPI. Determine a regular reporting frequency so that you can track the progress
of your company’s efforts.

4. Share your goals with the company. Share your company goals on the
people you work with, get feedback, and strategize the best ways for
implementing your KPI plan. Teamwork is an essential part of every business, and
most teams function best when everyone is on the same page.

5. Review and update. Always review and update your policies on a weekly or
monthly basis to match your company’s changing landscape. As you grow and
expand, your goals likely will too. Use KPIs to keep up with the changing
landscape of your business.

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