ABCs of KPIs: Beginner's Guide to Key Performance Indicators

Whether a company is a newly planted seed or a more mature operation, appropriately and strategically measuring growth is a sure-fire way fo...

Whether a company is a newly planted seed or a more mature operation, appropriately and strategically measuring growth is a sure-fire way for business owners to ensure that their enterprise continues to flourish through each stage of development. For a business to identify areas of weakness, measure strength, and determine best practices, it ought to examine quantitative indicators of success. Luckily, Key Performance Indicators, or “KPIs,” allow executives to evaluate their company’s achievement by measuring evidence-based progress about a particular objective.

Appropriate utilization of KPIs empowers companies to assess what’s working and what’s not, opening the door to more effective decision-making. If you’re interested in learning the ABCs of KPIs, check out this beginner’s guide to key performance indicators.

KPIs in practice

Companies can use KPIs to measure a variety of gauges, including the success of an individual employee or the performance of a department. Performance indicators typically survey metrics like sales, profits, quality of service, and customer satisfaction to project how well a worker, project, or strategy contributes to a goal. For example, a company may evaluate a sales department based on KPIs such as the percentage of customers retained in a year, the amount of product sold per salesman, or the number of lead inquiries in a month.

To effectively implement practices suggested by the implications of their KPIs, companies must first collect necessary data to determine whether they are meeting their success indicators. Business owners can collect accurate and comprehensive data from multiple sources to measure KPIs with a data streaming service provider like Striim.

When produced appropriately, KPIs support team members in measuring goal-related progress and comparing company performance against others in the field. Moreover, analysts can utilize KPIs to determine competitive employee compensation.

Reading key performance indicators

When reading key performance indicators and generating reports, executives ought to consider the “top line” (the goal the company aims to achieve) and the “bottom line” (measures of progress leading to the achievement of the objective). When designing KPIs, be sure to include ratios as percentages and keep units the same so that readers can compare values across the board.

Tips for successful KPI reporting

While a powerful and supportive tool, KPI-setting will only prove as effective as the reporting used to evaluate the indicators. Consider implementing these best practices when generating KPI reports. 

● Remain consistent when referencing indicators in your financial accounts. Using an array of indicators in your key performance indicator report may risk confusion and decrease informative or comparative value.

● Ensure that the KPIs you choose are clearly defined and easily measured. It is best to maintain a set of KPIs that reporters can easily track via numbers from financial data or internal systems so that reporting is effortless and swift.

● Be mindful of your employee’s understanding of your company’s KPIs. Each employee and position ought to have a comprehensive account of how you plan to evaluate their performance, as well as what data you plan to collect.

● Use clear, descriptive titles for your KPIs and keep them short and sweet. Ensure that headers are easy to understand at a glance to save readers the hassle of confusing or laborious analysis.

● Stay consistent when implementing visual reporting tools. If you utilize a particular type of graph or chart, using the same or similar visuals in future reports will be most conducive to simple and effective comparisons between reports. After all, tracking progress over time is the name of the game.

In conclusion:

When implemented practically, the use of KPIs will support your business in enacting strategic decision-making and, most importantly, flourishing long-term.