A Key Performance Indicator (KPI) is a measurable value that demonstrates how effectively a company, department, or individual is achieving key business objectives. Organizations use KPIs at multiple levels to evaluate their success at reaching targets.
Characteristics of effective KPIs
Good KPIs are often described using the SMART criteria:
- Specific: Clearly defined and unambiguous.
- Measurable: Can be quantified and tracked.
- Achievable: Realistic and attainable within the given resources and timeframe.
- Relevant: Aligns with strategic goals and objectives.
- Time-bound: Has a defined timeframe for achievement.
Examples of KPIs
KPIs vary greatly depending on the industry and business goals. Common examples include:
- Sales: Revenue growth, customer acquisition cost (CAC), conversion rate.
- Marketing: Website traffic, lead generation, social media engagement.
- Product: Daily active users (DAU), feature adoption rate, churn rate.
- Customer Service: Customer satisfaction score (CSAT), net promoter score (NPS), average resolution time.
Why KPIs matter
- Focus: Align teams and efforts towards common goals.
- Measurement: Provide objective evidence of progress.
- Accountability: Clarify responsibilities and track performance.
- Decision-making: Offer data-driven insights for strategic adjustments.
Selecting the right KPIs is crucial. They should reflect the organization's strategic objectives and provide actionable insights, rather than just being vanity metrics.
