Key Performance Indicators (KPI)

What are Key Performance Indicator (KPI)?

Key Performance Indicators are indicators that drive an organization towards its goal. KPIs help in setting targets and tracking the target accordingly. KPIs also helps in recognizing the leading and lagging indicators of the organization, thus helping them direct their focus on required areas.KPI thus helps companies to measure the progress and evaluate the performance of employees and manage them as effectively as well as efficiently.

If your performance improvement goals are related to inbound marketing, sales, or any aspect of business for that matter, it is essential to choose the proper key performance indicators (KPIs) it helps to focus on is the first step towards measurable improvement.

Key Performance Indicators, KPIs are measurable metrics that show how well your organization, team, or individual) is hitting its goals. They are as the scoreboard for your HR efforts. KPIs give you the numbers to back up your answers, or expose where you’re dropping the ball.

KPIs aren’t just random stats you slap on a PowerPoint to impress the boss. They’re supposed to mean something. Pick the wrong ones, and you’re chasing your tail. Pick the right ones, and you’ve got a clear map to success. 

If you want to measure if your companies performance goals, business units, projects or individuals projects are performing in relation to their strategic goals and objectives, KPIs helps them to measure.

KPIs are also useful decision-making tools. Because they help reduce the complex nature of organizations to a small, manageable number of key indicators, KPIs also, in turn, assist decision making by ultimately, helping in improving performance.

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What are key performance indicators in project management?

Metrics are used to measure different aspects of business activity at a particular point in time to find what is kpi in project management. KPIs includes has strategic objectives to measure performance against a specific target. These targets are further defined in strategic, planning and budget sessions and thus have a range of performance.

When KPIs are design, it becomes vitally important to think through the possible unintended consequences of measuring them. If we are unable to track it, we run the risk of the KPI causing more harm than good.

When we are designing a KPI to find out the key performers in project management, it’s vitally important to think about the possibility of unintended consequences of measuring it. If we don’t consider it, we might run the risk of the KPI causing more harm than causing any good.

Also, KPIs are metrics, but not all metrics are KPIs.

• Quantitative indicators are usually presented by numbers.
• Qualitative indicators need not be measured in numbers but various different parameters in accordance to the requirement.
• Leading indicators that helps in knowing the outcome of any process
• Lagging indicators that helps in knowing the success or failure of any process post hoc
• Input indicators are the one that measures the amount of resources consumed whilst generating the outcome
• Process indicators it helps in representing the efficiency or the productivity of the process
• Output indicators it helps in representing the outcome or results of the process activities
• Practical indicators that interface with existing company processes.
• Directional indicators this specifies whether or not an organization is getting better.
• Actionable indicators are in the hands of an organization’s control to effect change.
• Financial metrics or indicators where the user is in performance management and where does it stand on the organization level

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How to measure KPIs?

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If you wish to know how to measure KPIs can be created here’s a quick walk through it:

1. Define your objective clear

If a goal of the business is to be the 'market leader', then a KPI objective maybe used to 'increase revenue by 10% this financial year' or 'Expand our product lines to 20'. State clearly, and in simple terms the purpose of the KPI. This can provide guidance for everyone in viewing the KPI to interpret the actual data in the correct context.

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2. Draft the criteria for success

What will the target be? Is it attainable? when should it be accomplished? and how will progress be monitored? Targets should be realistic, changes to business processes take time to implement. In the initial stages of KPI monitoring it's best to focus on long-term targets with midterm monitoring to achieve success.

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3. Acquire sufficient data

Investigate the availability and accuracy of the data. Data may be available automatically from existing systems or hidden in reports and databases. This data will all need to be pulled together at regular intervals for reporting in one central place.

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4. Formulate the KPI

Some KPIs contain a single metric or measure. However most rely on a combination brought together under a single calculated formula. For example, a KPI that measures productivity in revenue by machine would look like this: Total Revenue divided by the total number of machines. Build formulas and create calculations with test data to see if the results are what you would expect.

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5. Present your KPIs

To efficiently communicate your KPIs you'll need to translate the data into understandable visuals such as graphs and charts. Dashboards for Operational KPIs, or Reports for Strategic KPIs offer a convenient way to create, track and distribute your KPIs.

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When key performance indicators (KPIs) are used, their impact goes beyond our intention on monitoring our goals and reaching targets. KPI dashboards also helps in measuring people’s influence behavior and the results of other measures. These influences can be unexpected and undesirable, so we must either change them or choose another way to measure. When the measures are quite severe, you may also want to give these measure a trial period. You’d be wise to monitor the unintended consequences to find out how bad they really are, and how realistically you can mitigate them.

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How can you choose KPI’s that don’t suck:

Choosing the right KPIs is like picking the perfect playlist for a road trip, it sets the vibe and keeps everyone on track only in organisation Here’s how to nail it:

Step 1: Align with business goals

Your KPIs should mirror what the company cares about. If the C-suite wants innovation, track metrics like employee participation in idea-sharing programs. If it’s about profitability, focus on cost-per-hire or absenteeism rates, then build your KPIs around that.

Step 2: Make them SMART

KPIs need to be:

• Specific: “Improve employee engagement” is vague. “Increase employee engagement score by 10% in six months” is specific.
• Measurable: If you can’t put a number to it, it’s not a KPI.
• Achievable: Setting a goal to reduce turnover to 0% is cute but unrealistic.
• Relevant: If it doesn’t tie to your company’s mission, it’s noise.
• Time-bound: Give yourself a deadline to keep things urgent.

Step 3: Mix leading and lagging Indicators

Lagging indicators like turnover rate tell you what already happened. Leading indicators like training completion rates predict what’s coming. You need both to stay ahead of the game.

Step 4: Test and tweak

Your first stab at KPIs might not be perfect. Treat them like a recipe—taste, adjust, repeat. Run a pilot for a quarter, see what works, and ditch what doesn’t.

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KPIs that actually prove your worth

Here are the KPIs you should be tracking, why they matter, and how to sell them to the people who hold the purse strings. We'll roast the vanity metric counterpart for each one, so you know exactly what to avoid.

1. Business function

‍This is the most common way to group KPIs, making them relevant to a specific department. As HR professionals, you’ll focus primarily on HR KPIs, but it's helpful to see how they fit into the bigger picture.

• Financial KPIs: High-level metrics tracking the company's financial health (e.g., Net Profit Margin, Revenue Growth).
• Sales & marketing KPIs: Performance indicators for sales and marketing teams (e.g., Customer Acquisition Cost, Lead-to-Sale Conversion Rate).
• Human resources (HR) KPIs: The metrics that track the health and effectiveness of the workforce. 

2. Recruitment & talent acquisition KPIs

These KPIs prove that your hiring process isn't a black hole of money and time.

• Quality of hire : This measures the value a new employee brings. You measure this by combining factors like first-year performance reviews, new hire retention, and manager satisfaction. This KPI proves that you're not just filling seats but building a stronger team.
• Time to fill (Operational, Lagging): The average number of days from when a job is approved to when a candidate accepts an offer. A long "Time to Fill" is a direct cost to the business in lost productivity. This KPI proves your process is efficient.
• Cost Per hire (Operational, Lagging): The total cost of hiring a new employee, divided by the number of new hires. This shows if your recruitment budget is being spent effectively and helps you find ways to be more efficient.

3. Time orientation

This categorization helps you understand if a KPI is a warning sign or a report card.

• Leading indicators: These KPIs are forward-looking. They can help predict future performance and signal potential problems before they happen. Think of it as a low fuel light on your car, it warns you before the engine stops.
• Lagging indicators: These are backward-looking. They measure past performance and tell you what has already happened. 

The best HR leaders use a mix of these different types. You track a lagging indicator like turnover rate, but you use a leading indicator like eNPS to predict and prevent it.

If your organization is all about growth, track hiring speed and quality. If it’s about stability, focus on turnover and engagement. Don’t measure stuff because it sounds cool, every KPI should have a purpose.

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What are the types KPIs?

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Irresepctive of industry, when conducting employee appraisals, managers look for competency in critical areas. In every company managers want to see employees are meeting established goals, working as contributing members of the team and applying critical thinking skills to help ensure business operations are successful. There are many types of KPIs (key performance indicators), the top areas of attention address key areas of operations.

1. Teamwork

Team members who work together on projects and initiatives are basically seen as strong and contributing team players. Examples in which employees show a strong sense of team commitment:

• Participating in group brainstorming to build productivity.
• Volunteering for roles on team projects.
• Taking up the slack when necessary.
• Sharing credit.
• Supporting others' ideas and approaches.
• Being willing to step into roles others don’t want.

Indications of poor teamwork, on the other hand, include:

• A lack of interest to participate in group work.
• A poor attitude toward project objectives or approaches.
• Lack of participation.
• Efforts to undermine group work.
• A lack of feeling to share credit and a propensity to place blame or shift responsibility.

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2. Communication

If you have an accurate, appropriate, professional business communication it is an important part of every employee's job. Employers will evaluate these skills with the following parameters in mind:

• Clear, concise verbal and written communications.
• Timely follow up to voicemail, email and customer inquiries.
• Responsive attitude toward colleagues and managers.
• An ability to accurately articulate concepts, ideas, and feedback.

Lack of communication skills are exhibited by:

• Lack of ability to deliver clear and concise directives.
• Unresponsiveness or incomplete responses to requests from colleagues.
• Communication that includes typos or grammatical mistakes or is inaccurate.

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3. Customer Service

Regardless of the role you are in, you are directly or indirectly helping your customer base through your position. Your employer will measure your work in critical performance areas related to customer care, including:

• Polite, professional interactions with customer onboarding.
• Ensuring problems are handled rather than being passed off.
• Offering them with solutions or ways to resolve customer complaints.
• Timely responsiveness to customer needs.
• Good representation of the company.

Bad customer service skills you might be called out for include:

• Slow reaction time to customer issues.
• Failure to offer solutions.
• Lack of empathy or understanding.
• Lack of willingness to deal with customers and displaying anger or frustration in handling problems.

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4. Job Functions

Key performance indicators that are related directly to your job roles and functions will be valued during an evaluation, but this specific area will vary based on your role and responsibilities. Key performance indicators might include:

• Timeliness
• Attention to detail.
• Creativity and innovation.
• Good time management.
• Ability to perform in all key areas of the role.
• Consistency
• Initiative

Employers will also track that if the employee has met pre-established goals during the time period between appraisals. Key performance Indicator are typically specific to your job roles and job function and may include anything from learning a new software program to leading a team onr hitting an earnings goal.

HR departments track KPIs such as employee satisfaction levels, organizational goals and turnover rates, while the KPIs that IT managers look at include system uptime, compliance with service-level agreements, on-time project completion value and total average resolution time on help desk tickets.

Conclusion

Stop just measuring things. Start measuring what matters.

KPIs are more than just numbers on a spreadsheet; they are the evidence of your impact. They tell the story of your department and the health of your organization. They empower you to stop reacting to problems and start predicting them.

It's time to get real. It's time to use KPIs to get out of the back office and into the strategic conversation. Your company needs it. And you deserve it.