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What are Key Performance Indicators (KPIs) and why should I care?

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You’ve probably heard of Key Performance Indicators (KPIs). But what are they? And why should you care? 

In short, KPIs are a way to measure whether you’re achieving your business goals. They’re used in all sorts of businesses, from the very small to Fortune 500 companies. 

The great thing about KPIs is that they can be customized to any business goal. Whether you want to increase sales, reduce costs, or improve customer satisfaction. They are used to track progress against a goal and should be used to monitor the activities that affect that goal. But not the overall goal itself! Instead, KPIs need to be actionable and measure precise activities, otherwise they won’t be useful for decision making. 

What are key performance indicators?

Key Performance Indicators (KPIs) are quantifiable measurements used to track and evaluate how successful a business is in achieving its goals. KPIs measure the efficiency and effectiveness of a wide range of activities, ranging from marketing campaigns to customer service to overall performance. KPIs are a way to quantify success. By tracking KPIs, businesses can identify opportunities for improvement, measure progress against goals, and make better decisions. KPIs are also a great way to communicate progress and results to stakeholders. Whether you’re talking to your boss, other departments or to investors, KPIs provide an easy way to summarize progress in a concise, understandable way. 

Why are key performance indicators important?

KPIs are important for any business because they provide insights into the effectiveness and efficiency of your processes. KPIs can help with decision-making, resource allocation, and overall performance management. By tracking KPIs, businesses can identify areas for improvement, track progress against goals, and make adjustments and improvements over time. KPIs also provide useful signals that can predict changes in the business environment. 

Types of key performance indicators

There are many different types of KPIs, but the most common ones measure performance in the areas of sales, marketing, customer service, operations, and finance. Sales KPIs measure sales activity and effectiveness, such as the number of leads, conversion rate, average order value, and revenue growth. Marketing KPIs measure the effectiveness of marketing campaigns, such as the number of leads generated, cost per lead, and cost per acquisition. Customer service KPIs measure customer satisfaction, such as the average response time, resolution rate, and customer retention rate. Operational KPIs measure operational efficiency, such as the number of orders processed, delivery times, and inventory levels. 

It’s important to note here that we don’t assign KPIs to goals. Stay away from that temptation! (instead, a goal is a Key Results Indicator or KRI), You can Also explore more about

Are your KPIs Actionable?

Do you know what needs to be done, what action to be taken, by looking at the KPI? For example, if the KPI is to “improve customer retention by 5% per month”, do you know what you should do if that value drops? Likely not, since many things can influence that number. So that’s not a good KPI.

Instead, assign KPIs and targets to the specific things you can do to influence your customer retention rate. Those things could be to make sure your responses to customer chat requests are within one minute 90% of the time; that customer problem resolutions are at 95%; that your customer satisfaction index is at 90% or above. Those are specific things you can monitor since they all influence customer retention. 


How to choose the right key performance indicators for your business

Choosing the right KPIs for your business can be a challenge. Don’t pick a KPI from a list! Instead, you’ll want to take some time to think about your business goals and how you can measure progress towards them. Then figure out what things you need to do to attain that goal. When you’re choosing KPIs, look for metrics that are measurable, actionable, and aligned with your business goals. 

Setting targets for your key performance indicators

Once you’ve chosen your KPIs, you’ll need to set targets for them. Setting targets gives you something to aim for and gives you a way to measure performance. When setting goals, it’s important to be realistic and to choose goals that are achievable. It’s also helpful to set short-term and long-term targets. For example, if your KPI is to track outbound sales calls, you can set a target of 100 per week, or 500 per month and so on. 

Adjusting and improving your key performance indicators

As you start tracking your KPIs, you’ll likely find that some of them need to be adjusted or improved. This is an important part of the process, as it helps you measure what works and what doesn’t. As you make adjustments, you’ll want to track the changes and measure their impact. This will help you identify what’s working and what’s not so you can focus your efforts on the things that are producing the best results. 


KPIs are a powerful way to measure success and make informed decisions. By understanding KPIs and choosing the right ones for your business, you can track progress and make sure that you’re reaching your goals. When selecting KPIs, it’s important to find ones that are measurable, actionable, and aligned with your goals. Once you’ve selected your KPIs, you’ll need to set goals and targets, measure and track them, and make adjustments in order to maximize performance. By taking the time to measure and track your KPIs, you’ll be able to understand your progress and make better decisions for your business.

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[…] KPI Karta. (n.d.). What are Key Performance Indicators (KPIs) and why should I care? Retrieved on 20 January 2023 from […]