What is a Key Performance Indicator (KPI) ?

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Surely you have heard on many occasions talk about KPIs, the evolution of KPIs, analyze a KPI, etc. and you may have wondered, okay, but what is a KPI? What is it for? What does it contribute to my business? If so, keep reading this article where we try to solve these doubts and we also comment on important aspects to get the most out of your business indicators.

What are KPIs used for?

When talking about a KPI, we refer to a key indicator in business performance that allows us to measure the success of our actions. It can be expressed in monetary, units or percentages terms.

The key performance indicators should be an x-ray of the business and offer optics that allow us to make better decisions because we will have data in real-time, from wherever we are, which allows us to make timely decisions that result in an increase in profitability of the business.

The purpose of a KPI must be to show a performance result in order to improve it. There are indicators for various areas of a company: sales, purchases, inventory management, inventories in process, profits, margins, etc. Large companies have KPIs that show if the actions carried out are paying off or if, on the contrary, they do not progress as expected.

The objective of these indicators should not only be the analysis of results. These indicators are part of an extensive range of tools that serve for continuous improvement. This term encompasses many concepts that serve to detect strengths and weaknesses or improvement areas of a department within the company.

With this, we can support the team in charge of this task to develop various skills that will be reflected in the increase or decrease in the volume of our profits.

How to define KPIs?

Once you know what the indicators are and what they can do for you, it would be necessary to determine the ideal way to define them. When setting a KPI there are three key aspects:

  • The decision of the variable to be measured.
  • The identification of the long-term general strategic objective.
  • The establishment of specific short-term goals.

The definition of a KPI is not simple and can become something really complicated, one aspect to focus on for its definition is in the letter K of Key, because it must be related to a specific objective. Sometimes KPIs are confused with simple measurements of company data and it is not exactly the same since KPIs must be defined according to a KEY objective of the company. Some questions you can ask yourself are:

  • What is the desired objective?
  • Why does meeting this goal matter?
  • How will your progress be measured?
  • How can you influence the result?
  • Who is responsible for getting it?
  • How can you know that you have reached your goal?
  • How often should I check progress?

It is important to consider these questions before we start to make a comprehensive scorecard. In this way, we will carry out activities with meaning and usefulness for our final objective.

How to measure KPIs?

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Performance indicators are chosen based on the company’s strategy. If they know how to measure appropriate KPIs, the ones that work best, and generate feedback, evaluate how to request an appointment with an expert, the budget, the steps to subscribe to a newsletter, download ebooks, etc., they will know how to give value to each stage of your business.

For example, if you need to closely monitor the most shared articles on the organization’s blog, you can evaluate:

  • Number of actions
  • The 30 most effective keywords
  • Number of article impressions
  • Clickthrough Rate
  • Positions
  • Number of clicks
  • Time spent on pages
  • Number of backlinks
  • Number of sessions
  • New visitors vs returning visitors
  • Number of page views
  • Most viewed pages
  • New visitors vs returning visitors
  • The average duration of the sessions
  • Conversion rate
  • Number of downloads
  • Number of form submissions

To know how to measure KPIs in an organization, it is important to select each case, since they can vary from one business model to another but one thing they have in common: they will need a tool to complete this task. Even so, the interpretation of the indicators and the measures taken to improve them are of vital importance for the proper functioning of your business.

What is a KPI Dashboard?

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A dashboard is an information management tool that offers an overview of a company’s key performance indicators (KPI). They monitor the key metrics and health of a company and facilitate the visualization and understanding of the data. Also, they often measure performance data in tables, graphs, and maps.

  • The functions that KPI dashboards perform are:
  • You can carry out continuous monitoring of changes in KPIs during a given period and then compare them with previous periods.
  • Establish and receive notifications every time KPI values reach a certain value.
  • You will have the option to link the KPIs with other panels.
  • Establish certain KPI perspectives of greater importance to achieve an improved overview of business processes.

Now that you know what a KPI is, we encourage you to reflect and think about how you can help yourself with these metrics to make decisions based on objective data.

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