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Key Performance Indicators

Definition and Different Uses

Key Performance Indicators (KPIs): Definition and Different Uses

KPIs are important and ubiquitous in the modern business world, especially when it comes to strategy sessions, executive meetings, performance reviews, etc. The main problem is that this term is often misunderstood and overused. Although Key Performance Indicators are quite common, the businesses that use them aren’t, but they can make a big difference in their success and failure.

What Are KPIs?

These are measurable values that demonstrate the effectiveness of a particular company in achieving its important business objectives. Businesses use KPIs at different levels to evaluate and measure their success at reaching them.

  • Low-level KPIs focus on employees and process in such departments as marketing, sales, or call centres;
  • High-level KPIs focus on the overall performance of a company.

In simple terms, they provide an effective way to measure how well business units, enterprises, individuals, and projects perform in terms of their objectives and strategic goals.

In broader terms, Key Performance Indicators provide essential performance data to enable companies or their stakeholders to understand if they’re on track toward important objectives. The well-designed ones are significant navigation tools that give a clear picture of current performance levels and if the enterprise is where it should be.

Besides, KPIs are quite helpful decision-making tools as they help break down the complex nature of a company’s performance to a manageable and small number of key indicators. They’re necessary to assist decision making and improve performance.

Use of KPIs as Efficient Navigation Tools

Managers use these navigation tools to get a better understanding of whether their company is on its successful voyage. The right set of Key Performance Indicators highlights the areas that require extra attention and other key aspects.

All businesses require an effective way to assess their position and determine if they’re on the right course toward important strategies. They should correct fast and be able to adapt to changing market conditions. To succeed in a highly competitive market, it’s necessary to have a proven and tested way to measure progress in real time to adapt all actions according to KPIs data.

KPIs as Important Decision-Making Tools

Efficient decision makers realize the need for data on key performance dimensions. That’s why they distil them into crucial KPIs, which should be closely tied to all strategic objectives to give the answers to the most important business questions.

What is the best starting point? Identify all the major questions that managers, decision makers, and external stakeholders should answer. These Key Performance Questions should be identified for all strategic business objectives. After that, it’s necessary to choose or develop the most efficient KPIs to answer them appropriately. This way, all of them will be relevant, strategic, and meaningful.

Significance of Choosing the Right KPIs

There are many Key Performance Indicators to choose from. Some companies find it difficult to choose the right ones and end up reporting and measuring a lot of information on the things that are easy to measure. It’s one of the most common KPI pitfalls. Sometimes, companies simply choose the indicators that others use, even if they aren’t important to their performance and objectives. It’s necessary to choose and develop the right KPIs for a particular enterprise.

The modern business landscape is quite competitive and challenging. That is why senior executives and business leaders should be able to improve their performance, make well-informed decisions, and look for new ways to stand out and beat the competitors. When used effectively and understood properly, KPIs give quite a powerful tool in achieving that.

What Are Smart KPIs?

Using special smart criteria is an effective way to evaluate their relevance. There are certain questions that should be answered, such as the following:

  • Are business objectives specific?
  • Are they realistically attainable?
  • Is it possible to measure progress toward them?
  • How relevant are they?
  • What is a realistic time frame to achieve them?

What Makes KPIs Efficient?

Companies blindly adopt them even if they don’t reflect their goals. KPIs are also a form of communication, and it is an often overlooked aspect. It means that they need to follow the same practices and rules as other forms of communication. To develop and adjust an effective strategy for formulating them, teams start with the main basics and understand company objectives. It is an iterative process involving useful feedback from managers, analysts, and department heads. KPI monitoring should be seen as a beneficial practice. 


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