KPI (Key Performance Indicator)

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What is a KPI? A KPI (key performance indicator) measures the goals of the business against the actual, quantifiable data over a defined period. It is a way for companies to determine if a project is on track to meeting its objectives. By providing a focus for strategic and operational improvement, KPIs create an analytical basis for decision making and direct attention to what matters most.

Why are KPIs important?

KPIs are a structured way to understand what every facet of a business does, and is often the foundational component of management. With KPIs, business owners and managers can have a quick overview of the performance of their businesses - or specific departments - at any given time.

What is the purpose of KPIs?

The primary purpose of all KPIs is to monitor progress toward short- and long-term company goals. Each department or individual in a company can use KPIs to monitor, track, and analyze performance.

Useful KPIs will:

- Demonstrate objective progress in achieving a desired goal

- Inform better decision-making by measuring what should be measured

- Compare performance changes over time to gauge the degree of change

- Measure efficiency, effectiveness, quality, timeliness, governance, compliance, behavior, economics, personnel performance or resource utilization

- Have a balance between leading indicators and lagging indicators

What are lagging and leading KPIs?

Leading KPIs gauge performance before a trend emerges in the process or outcome. They help predict trends or changes and are forward-looking. While not always accurate, leading KPIs set a benchmark for the business.

Examples include:

- Increase in monthly subscriptions

- Number of landing page visitors

- Basis points growth in market share

- Number of net-new customers who purchase a product

Lagging KPIs demonstrate how well the business managed its systems or processes. Lagging indicators can be used to provide a better understanding of performance.

Examples include:

- How many accounts were retained?

- How many product features were released in the year?

- What was the net revenue in Q1?