What Is a KPI?

Posted by AmandaTom on August 1st, 2013

Whether it is in schools, businesses, organizations or even hospitals, KPIs seem to be surrounding us. For some of us, they are an essential part of our jobs. But what exactly is a KPI? Given the fact that this indicator is a means of measuring the performance of a company, it would be impossible to give a KPI definition without bearing in mind the objectives and goals of a company or organization.

When considering the future performance or the mission of a company, there is nothing more important than deciding upon a set of goals that can be quantified in specific outcome. The possibility of monitoring the measuring of the progress made by the company or organization and compare it to the organizational goals is given by a KPI. The acronym stands for ‘key performance indicator’ and it defines a metric used by most executives in decision making strategies.

These indicators are designed to give an understanding of how well a company is performing compared to its objectives. Therefore, if a company’s objective is to make money for example, then the KPIs will measure the income brought by sales and profit. A KPI cannot measure aspects like “becoming the most popular company”. This means it must be quantifiable. It must give your decision makers an opportunity to step in at the right time in order to create improvements in the most essential areas of the business.

A key performance indicator will benefit any business. There are thousands of possible indicators researched until now, each of them serving another purpose or another kind of business. Finding the right combination of KPIs is sometimes more difficult than it would have been thought. The reason is because, once a KPI definition has been chosen, it is important to stick to it for a long period of time in order to achieve the desired performance. Changing it from year to year is not going to bring any improvement. However, a KPI definition can be modified once the goals have been achieved or if the performance target is no longer available.

Effective key performance indicators are closely tied to strategic objectives. The performance framework of a company must be analyzed before any decision regarding KPIs development. A wrong performance indicator can point your employees and decision makers on the wrong tracks, which will reflect in a bad performance of the company. No matter if they are related to increasing sales, improving customer service or enhancing the image of the company, the main purpose of KPIs is to direct the entire team in a direction that benefits the company. For example, one goal can keep sight of reducing customer service calls to 50% in a determined period of time. This means that one thing the key performance indicator can do is to classify the calls by analyzing the event that caused them.

Find out which KPI definition can help you pursue your company’s goals by browsing an online catalogue of over 6400 KPI examples from SmartKPIs.com!