Key Performance Indicators

What are the 5 key performance indicators?

1. Customer Satisfaction:

   This is the one almost every business will want to use. By tracking customer satisfaction, employees and companies can quickly understand where problems may lie within the organization. For example, follow-up questionnaires that measure how well customers believe they and their case were handled by a customer service representative, or how effectively they believe a salesperson handled their request, are good ways to measure the side of the customer. personal performance of customer satisfaction.

2. Employee Satisfaction:

   KPIs should consider both external and internal indicators affecting the business. In the case of employees, this internal KPI can range from qualitative measures such as productivity to qualitative factors such as motivation or satisfaction.

3. Teamwork:

   There are several collaboration metrics that can form the basis for a performance matrix tracked over time. They can focus on traffic, utility, efficiency, initiative or quality. It is possible that group performance will have a significant impact on business, as teamwork affects customers and employees' satisfaction if the groups are not performing effectively. All of this affects the overall performance of the team member.

4. Employee Turnover Rate:

   A large company with a lot of exits will suffer in terms of internal morale, ongoing customer relationships, and the overhead associated with additional hiring and training. Understanding that the churn rate is high then opens up opportunities for personal KPIs that track employee metrics that affect employee retention, such as compensation, benefits, team cohesion, job satisfaction. work, etc.

5. Achieving Goals:

   Any well-managed company provides its employees with a clear vehicle for the prospect of meeting personal goals or objectives. The inevitable conclusion of being an employee is that the company has hired you to accept items in its employment. Thus, the performance of any HR manager, whose salary is eligible, must meet the objectives set when the individual joins the team.

How is KPI calculated?

Here some of the ways to calculate KPIs.

1. Understanding Data Counts:

   Counts are simple numeric values and are easy to calculate. They are useful for measuring something that does not need any context to show a change in the rate or timing of occurrence. However, the KPI count does not work properly in cases where more context is needed to more accurately represent performance.

2. Calculating Percentages:

   Percentages elaborate off counts by dividing the number of people or things that exhibit a target characteristic by the total population size. This number is then multiplied by 100, thus the name per (by) cent (one hundred). Some examples are:

   • Percentage of employee vacation days used.
   • Percentage sales growth by quarter.
   • Return on investment.
     
     

3. Sums or Totals:

   Sums or totals are continuous variables, meaning they are measured and not counted. This means that sums or totals can take the form of numbers with decimals. Example- Total company revenue, Total cost of retail product inventory.

4. Averages of Data:

   Also known as the mean, the average is the sum of all the numbers in a dataset divided by the total number of data points. It is a good big-picture way of measuring to what degree an aspect of a business is occurring. Examples: Average customer feedback rating, Average revenue per sales call, Average cost of each product.

5. Ratios to Compare Numbers:

   Ratios compare two numbers side by side. Ratios are denoted with two numbers side by side, separated by a colon. This allows the observer to compare the two numbers and their relation. Examples: Number of inbound versus outbound sales calls, In-store purchases compared to online purchases.

   Some common examples of KPIs:

   1. Sales Growth Over Time
   2. Gross Profit Margin
   3. Return on Investment
   4. Cost Per Hire
      
      

What is the difference between a KPI and a metric?

A metric is a class of quantifiable data relevant to an organization's standard business processes. An important difference between a KPI and a metric is that the metric does not need to be directly linked to a strategic objective.

A KPI, on the other hand, is a performance metric that is directly related to business objectives. This could be growth of revenue, ROI, customer acquisition, and so on, but the key point is that the KPI is tied to a specific goal.

How do I create a KPI?

Here's how to create a Key Performance Indicator (KPI):

1. Establish a clear objective:

   Clearly, and in simple terms, KPI's purpose. It provides guidance to everyone who sees KPI so that the data can be interpreted in the right context.

2. Outline the criteria for success:

   What will be the goal? Is it achievable? When should it be received? And how is progress being monitored? Goals must be realistic, changes in business processes take time to implement.

3. Collect the data:

   Research the availability and accuracy of your data. The data may be automatically available in your existing system or it may be hidden in a report or database. All this data should be collected periodically for reporting at a central location.

4. Build the KPI formula:

   Build formulas and create calculations with test data to see if the results are what you would expect.

5. Present your KPIs:

   To effectively communicate your KPIs, you need to transform your data into understandable visuals like charts and graphs. Dashboards for Operational KPIs or Reports for Strategic KPIs provide an easy way to create, track and share your KPIs.

When should I review KPIs?

KPIs should be reviewed at points relevant to the final time you've set for achieving the goal. Also remember that the goal you set should be achieved within one year's time. It could also be monthly if that's enough time to measure progress.

How many KPIs should I track?

Goals may require metrics or KPIs. However, you may need two or three KPIs or metrics for one goal, as follows. When you need multiple stakeholder perspectives on your goals. However, use no more than three KPIs or key figures for each goal.

Why are KPIs important?

1. Goal Measurement:

   Most companies set the strategic goals they want to achieve. One way to measure the company's progress in achieving these goals is through the use of performance indicators. Without KPI implementation, the company would not have accurate data to know that it has achieved its goal.

2. Vital Information:

   KPIs provide business owners immediate insight into the overall performance of their business. In today's competitive business environment, it becomes very important for the owner to keep real-time data about the health and profitability of his business.

3. Continuity:

   As KPI pursues long-term strategic goals, it becomes important to maintain consistency of measurement over time. When a company can change its targets, the KPI measurement should remain the same. For this reason, KPI becomes strategic to the company’s plan and vision.

4. Consideration:

   KPIs helps set measurable goals for the organisation. For example, a company that has established KPIs to increase customer retention does not have a chance to achieve this goal. The goal has no measurable components that provide viable steps. When a company reviews a KPI to improve customer retention by 10%, it sets measurable and quantifiable goals. Companies need to transform measured and quantified data into actionable elements to achieve their goals.