Key Performance Indicator

Reviewed by Apoorva | Updated on Aug 27, 2020

Introduction

A Key Performance Indicator (KPI) is a measure of the effectiveness of a company in achieving its key business objectives. KPIs are used to evaluate a companys success in reaching the set targets. Organizations use KPIs at multiple levels to evaluate their success. High-level KPIs may focus on the overall performance of the business, while low-level KPIs may focus on processes in departments such as sales, marketing, HR, support and others as well as in determining strategic, financial, and operational achievements.

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Monitoring the performance on a regular basis can help you understand and influence in setting up trends.

Why Key Performance Indicator is important?

KPIs furnish important performance information regarding a company that enables organisations (or their stakeholders) to understand whether or not the organisation is on track toward reaching its stated objectives. Consequently, well-designed KPIs act as vital navigational instruments, giving a clear picture of current levels of performance. It also throws light on whether the business is where it needs to be.

Industry Impact

KPIs can take any form based on the sector to which it is applied. KPIs can be more anecdotal, measuring foot traffic in a store, employee retention, repeat customers, and quality of customer experience, among others. KPIs can make a huge difference in the success of a business.

KPIs can also be thought of as useful decision-making tools as they present the complex nature of organisational performance to a small, concise, manageable number of key indicators. KPIs can assist in decision making and, ultimately, help improve performance.

Conclusion

KPIs do not necessarily have to be confined to financial data. Though profits earned and debts incurred are important key financial indicators, a companys relationships with both its customers and its employees are no less important to establishing its general health.