Key performance indicators

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Key Performance Indicators (KPIs) are a mode to measure and monitor the performance of an organization, business unit, department or specified activity. Organizations use KPIs at multiple levels to evaluate their success at reaching targets. 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.

Requirements Structure

  • A Measure  – Every KPI must have a measure. The best KPIs have more expressive measures.[1]
  • A Target  – Every KPI needs to have a target that matches your measure and the time period of your goal. These are generally a numeric value you’re seeking to achieve.
  • A Data Source  – Every KPI needs to have a clearly defined data source so there is no gray area in how each is being measured and tracked.
  • Reporting Frequency  – Different KPIs may have different reporting needs, but a good rule to follow is to report on them at least monthly.

Defining KPIs for your business

As you define KPIs for your business, here are four guidelines to keep in mind:[2]

  • KPIs vary  from company to company and will evolve at a single company as it grows over time. Two factors will significantly impact which KPIs are most important for your business: 1) your business model, and 2) your stage of business growth. Although KPIs differ from company to company, you can research industry benchmarksand get inspiration for what might work for you.
  • KPIs come in three different types:  overall business KPIs, departmental/team KPIs, and individual KPIs. The other type of metric to be aware of are Supporting Metrics. These are not KPIs, but measurements that compliment your KPIs by providing helpful context. Supporting Metrics define if you’re hitting KPIs in an effective way.
  • KPIs should be limited in quantity.  Keeping your team focused and united requires having few KPIs - ideally one overall KPI that’s important for the entire business and then a few relevant KPIs for various departments and individuals that all align with the primary KPI.
  • KPIs can be qualified using the IPA Rule.  This rule stands for Important (is this KPI important? does it matter?), Potential improvement (does this KPI have potential for improvement), and Authority (do you have authority or means to improve this KPI?). By asking these questions, you’ll determine if a particular metric is eligible to be a KPI for your business.

Business Teams

The best KPIs for your organization start with defining your business objectives and then designing KPIs that measure them. This list is perfect for those who have already defined their business objectives and are looking for some inspiration around ways to measure these objectives. We've organized the KPI examples by department to help you find the KPIs you need. KPI examples for the following departments are included:

Examples of top KPI's by business team
Marketplace Market Share, Buy Box, ROI, CAC (Customer Acquisition Cost)
Site Analytics Conversion, Add to cart rate, Revenue per Visitor, Page Conversion Rate, Time On Site, New User to Returning User Ratio
Merchants Inventory Turnover, EBITDA, Gross Profit Margin, Net Profit Margin, Monthly Recurring Revenue (MRR), Return on Equity (ROE)
Customer Customers Retention
Site Operations Size Coverage
Fulfillment Order Fulfillment Time
Marketing Monthly Website Traffic, Traffic to Lead Ratio, Cost per Lead
Social Media Engagement Rate, Reach, Social Media Mentions, Viral Coefficient

References

  1. 27 Examples of Key Performance Indicators www.onstrategyhq.com, Retrieved on 2018-08-28.
  2. Defining KPIs: How to Choose Metrics That Inspire Actions www.geckoboard.com, Retrieved on 2018-08-28.