Key Performance Indicators, commonly referred to as KPIs, are key indicators used to measure a company’s performance. Present in your dashboards and reports, they are important indicators in the management of an activity because they are a valuable aid in decision-making. This is why choosing these indicators wisely is important.
What is a KPI? How do I define a KPI? What are the different types of KPI? This is all that we will understand through this short article. Come on, let’s go!
What is the definition of KPIs? KPIs are numerical indicators that facilitate decision-making. They are also crucial in leading teams and managing an organization.
KPIs are used to measure performance in a company’s various departments: financial performance, human resources performance, supply chain performance, etc.
KPIs are indicators that provide efficient monitoring of actions. In particular, they are used to assess the ROI (return on investment) and market trends. There are two categories of KPIs:
- Activity metrics, these KPIs deal directly with the activity of the company or a department. They measure your production performance. For example: how many m² rented or sold in a month, how many recruitments in the quarter, ect.
- Metrics impacts are all the indicators that provide information about the impact of your actions on your market. As an example, we will find your market share in your different segments, your number of prospects, etc. The metrics impact is used to evaluate your shares and to strategically position yourself in relation to the competition.
Today, we must anticipate demand and have effective performance indicators for quick decision-making. KPIs are also effective tools for evaluating the actions taken by companies.
How to choose your KPIs?
Your reports are intended for different audiences. Consider presenting only KPIs that are of interest to this audience. You therefore present different KPIs to your employees according to their departments and hierarchy.
Moderate use of KPIs
A good definition of your KPIs is essential in order to obtain all the useful data for your service or company. Of course “useful data set” doesn’t mean you have to use all kinds of data. Your reports and dashboards must be clear and accurate. A report of more than 5 pages will never be analysed in its entirety, moreover it will necessarily include data without interest. Beware of information overload!
A temporal use
Whether it is activity metrics or metrics impacts, your KPIs must provide you with elements of comparison with previous periods. This is one of the key points in the definition of your KPIs. Thus, comparing your sales performance with previous periods and market trends allows you to anticipate your next sales. Moreover, having this look at the past makes it possible to define more precise objectives and thus to motivate your employees more. Also define the periodicity of the indicators (weekly, monthly, quarterly, etc.).
KPIs in line with the company’s strategy
A company’s strategy evolves over the years. These various changes must be present in the choice of your KPIs. If the objective of your company is the internationalization of its services, the measured data must take into account this internationalization (measurement of sales, recruitments, international market share...).
Data from different departments
It is important to keep in mind that the actions taken by one department affect another department. In the case of marketing, the marketing department works closely with the sales department. Thus, the number of prospects and customers, their ranking in business areas, geographical areas and the turnover generated are data produced by sales (and partly by marketing ). These same data are useful for advertising campaign targeting or product launch. Marketing has data from the field in its reports and dashboards thanks to the sales people.
KPIs and legislation
The legislator imposes the measurement of certain data on companies when it wants a profound change in society. Extra-financial reporting is a good example. It concerns the relationship between society and the environment and social issues. It is thus a question of responding to an objective defined by the state. These documents are legislated and their design follows rules issued by the authorities. In this case, you have no choice about your KPIs.
The different types of KPIs
Here we will not mention all the existing KPIs (they are as numerous as the areas in which performance is evaluated) but we will understand the large families of KPIs.
Productivity indicators are indicators that link your ability to provide a service or product to the company’s resources. This includes indicators such as the overall rate of return, the productivity rate or the level of production (quantity of product or service provided, number of recruits, number of new prospects, etc.)
The aim here is to highlight the quality of a product or service according to the expectations of the company (standards and current quality standards) and those of the customers. This measures service quality and customer satisfaction.
These KPIs focus on the amount of products or services that can be provided over a specific time frame. KPIs such as the average stock over a given period or the number of orders can be found.
These are indicators used to assess the achievement of an objective, whether it is the objective of an employee, a department or a company. Thus, we find indicators such as the percentage of achievement of objective for an employee or the percentage of market share obtained in a new country if the objective is to enter this market.
Example of KPIs in a financial report
To present its KPIs, the use of a dashboard is essential to have a global view of the situation in real time. Powerslide is a data visualization tool that makes it easy to create interactive and efficient dashboards. Below is an example of a financial dashboard with relevant KPIs.
Example of financial reporting with Powerslide