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.
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
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?
