Key Performance Indicators


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Key Performance Indicators

Key performance indicator aka KPI is a measurable value that shows how effective your business or organization is/was compared to previously set objectives.

There are in existence and in use a big variety of KPI’s that monitor the performance.  In this post, I will not go into detailing KPI’s because that is already done and is just one easy Google away.

According to Investopedia, the KPI can be defined as follows :

A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals. KPIs vary between companies and industries, depending on their priorities or performance criteria. Also referred to as “key success indicators (KSI)”.

Besides the actual definition of a KPI, you must not forget what a KPI is, it is a form of communication and must obey therefore all the rules of communication.

Also, a KPI is a statement, a static picture of what has happened in your organization/ business at a certain point of time. Therefore only one KPI says not very much it should be always put in correlation with others in order to show the correct big picture.

It is quite easy to identify a suitable KPI for your organization, just Google KPI ….you’ll get a lot of search results. One thing you should not do, don’t just take the KPI into your organization without understanding it very clearly.

A company must establish its strategic and operational goals and then choose the KPIs which best reflect those goals.

Being SMART about your KPIs

One way to evaluate the relevance of a KPI is to use the SMART criteria. The letters are typically taken to stand for specific, measurable, attainable, relevant, time-bound. In other words:

  • Is your objective Specific?
  • Can you Measure progress towards that goal?
  • Is the goal realistically Attainable?
  • How Relevant is the goal for your organization?
  • What is the Time-frame for achieving this goal?

Being even SMARTER about your KPIs

kpi2The SMART criteria can also be expanded to be SMARTER with the addition of evaluating and reevaluate. These two steps are extremely important, as they ensure you continually assess your KPIs and their relevance to your business. For example, if you’ve exceeded your revenue target for the current year, you should determine if that’s because you set your goal too low or if that’s attributable to some other factor.

Regardless of KPI’s you decide to monitor for your organization you have to keep in mind that to get the complete picture you have to look at the trend that the KPI’s are showing. Most of the times KPI’s are correlated with others in order to have more helpful information when analyzing your performance.

I have found 2 posts by Bernard Marr on Linkedin that illustrate the best what a KPI is and give you also a lot of examples of KPI’s.

What the heck is a …KPI

The 75 KPIs every manager needs to know

The search for KPIs is quite easy and not very challenging. On the other hand, the implementation and proper tracking and analysis are quite complex if you want to have all the positive aspects of KPIs and not the negative one.

Want to know more about this topic? Want to know how TopCFO can support your organization to grow, get in touch with us.

Take the right decision and choose the proper KPI for you, choose TopCFO.

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