As your organization begins to sketch out what your strategic plan might look like, it’s likely to come to your attention that you’ll need to gain consensus around what your key performance indicators will be and how they will impact your organization. If you haven’t thought much about your KPIs yet, that’s okay. We can help! We’ve compiled an complete guide that includes an overview on what is a KPI, the benefits of good indicators, and list of KPI examples [organized by department and industry] for your reference as you begin developing your organization’s key performance indicators.
Video Transcript – How to Write KPIs
Hi, my name is Erica Olsen. Today’s whiteboard video is on key performance indicators, or KPIs for short. These are those things that are associated with either goals or objectives, whatever you’re calling them, those elements of your plan that are the expressions of what you want to achieve by when those quantifiable outcome-based statements.
So KPI’s answer the quantifiable piece of your goals and objectives. They come in three different flavors. So we’ll talk about that in just a minute. But before we do, putting great measures together and making sure they work well for you, you need to have these four attributes. And before I talk about those four attributes, so I just want to say the reason they need to work well for you is because KPIs are the heartbeat of your performance management process. They tell you whether you’re making progress, and ultimately, we want to make progress against our strategy. So KPIs are the thing that do that for us. So you’re going to live with them a lot. So let’s make sure they’re really good.
Okay, so the four things you need to have in order to make sure your these measures work for you.
Our number one is your measure. So the measure is the verbal expression very simply, in words, what are we measuring, which is fairly straightforward. The tricky thing is, is we need to be as expressive as we possibly can with our measures. So number of new customers, that’s fine. There’s nothing wrong with that. But a little bit advanced or a little bit more expressive, would be number of new customers this year, or number of new customers for a certain product or a certain service. So what is it is it? Yeah, so it is, so be really clear. And when it comes to measuring it on a monthly basis, you’re gonna want to be as clear as possible. So number of new customers, let’s say this year,
Number two, is our target, or target is the numeric value that we want to achieve. So a couple of things that are important about this is, the target needs to be apples to apples with when the goal date is set, or the due date is set. So we want to achieve 1000 new customers by the end of the year. So the due date in the target works hand in hand. The other thing is the measure and the target need to work hand in hand. So it’s a number. So this is a number, this is a percentage, this is a percentage, you get the idea.
Third thing, we actually run a report on this data. So where is it coming from? Be clear about what the source is. Most organizations have all sorts of data sources, fragmented systems. So making sure you identify where this data is coming from will save you a lot of time.
And then frequency. So how often are you going to be reporting on this KPI, ideally, you’re running monthly strategy reviews to report on the progress of your plan, at least monthly, in which case we’d like to see monthly KPIs. So you got to be able to pull the data monthly in order to make that happen. That’s not always possible. But let’s try to get there. Certainly some organizations are weekly and others are daily, monthly is a good place to start. So frequency. Great.
So now we know the components that we need to have in place in order to have our KPIs. Here are some different types of KPIs that you might think about as you’re putting your plan together.
So there are just straight up raw numbers, I call these widget counting, there’s nothing wrong with widget counting, they don’t necessarily tell a story. And I’ll talk about how to make this tell a story in a minute. But this is just simply widget counting number of things.
The second thing is progress. So this is really often used, it’s great. We use this, which is expressed as percent complete percent complete of the goal, percent completed a project, whatever it might be, it’s a project type measure. It’s a good measure, if if you don’t have quantifiable measures, or you can’t get the data, and you just want to track the performance of the goal as it relates to action items being completed under it.
The third type of indicator is a Change Type Indicator, like percent increase in sales, making this better would be percent increase in sales compared to last year. And the idea is 22%. So you can see how that starts to be more expressive, and work with the target. So this serves to tell a little bit more of a story than this one does, right? And if you want to actually make your widget counting measures tell more of a story like this one does, you might change something like this to read percentage of new customers acquired compared to same time last year. So that’s an example.
Okay, so now we know what we have to have in place and kind of different types of measures to get our ideas flowing. Let’s talk about one thing that you might take your measure writing to the next level and that is think about the fact that there are leading and lagging measures so are leading and lagging indicators. So percent increase in sales or sales is a lagging indicator it occurred as an outcome. If you want to make sure that you’re on track ACC, you might have a KPI in place, which is telling us whether we’re going to hit that increase such as your pipeline, maybe number of leads, or the size of your pipeline. So we don’t want to over rotate on this necessarily, but we do want to make sure we have a combination of leading and lagging measures when we’re looking at our performance on a monthly basis.
So with that, that’s all we have for today. Hopefully you have what you need to write great KPIs for your organization. Happy strategizing. And don’t forget, subscribe to our channel.
What is a KPI?
Key performance indicators (KPIs) are the elements of your organization’s plan that express what outcomes you are seeking and how you will measure their success. In other words, they tell you what you want to achieve and by when. They are the quantifiable, outcome-based statements you’ll use to measure if you’re on track to meet your goals or objectives. Good plans use 5-7 of these to manage and track their progress against goals.
What are KPIs? What’s the purpose? Why do you need them?
Key performance indicators are intended to create a holistic picture of how your organization is performing against its intended targets or objectives. Great KPIs should accomplish all the following:
- Outline and measure your organization’s most important set of outputs.
- Work as the heartbeat of your performance management process and confirm whether progress is being made against your strategy.
- Represent the key elements of your strategic plan that express what you want to achieve by when.
- Measure the quantifiable components of your goals and objectives.
- Measure the most important leading and lagging measures in your organization.
The Five Elements of Key Performance Indicators
These are the heartbeat of your performance management process, and they need to work well! They tell you whether you’re making progress, and ultimately you want to make progress against your strategy. You’ll live with them, so make sure they’re valuable!
Great strategies track the progress of core elements of the plan. Each key performance indicator needs to include the following elements:
- A Measure: Every KPI must have a measure. The best ones have more specific or expressive measures.
- 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 one of these 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 measures may have different reporting needs, but a good rule to follow is to report on them at least monthly.
- Owner: While this isn’t a mandatory aspect of your KPI statement, setting expectations of who will take care of tracking, reporting, and refining specific KPIs is helpful to your overall organizational plan.
Indicators vs. Key Performance Indicators
An indicator is a general term that describes the different metrics of a business’s performance.
There can be several types of indicators a company may track, but not all indicators are KPIs, especially if they don’t tie into an organization’s overall strategic plan or objectives.
Key Performance Indicators
A key performance indicator, on the other hand, is a very specific indicator that measures an organization’s progress toward a specific goal or objective. It is typically recommended to narrow down the number of KPIs you track. You should only track the best and most valuable indicators that tie to your organization’s long-term and strategic direction.
Benefits of Good Key Performance Indicators
What benefits do they have on your strategic plan, and on your organization as a whole? A lot of benefits, actually! They are extremely important to the success of your strategic plan and implementing them correctly is critical to success.
- Benefit #1: They provide clarity and focus to your strategic plan by measuring progress and aligning your team’s efforts to the organization’s objectives. They also show your measurable progress over time and create ways to track your organization’s continued improvement.
- Benefit #2: Key performance indicators create a way to communicate a shared understanding of success. They give your team a shared understanding of what’s important to achieve your long-term vision and create a shared language to express your progress.
- Benefit #3: They provide signposts and triggers to help you identify when to act. A good balance of leading and lagging key performance indicators allow you to see the early warning signs when things are going well, or when it’s time to act.
How to Develop KPIs
We’ve covered this extensively in our How to Identify Key Performance Indicators post. But, here’s a really quick recap:
Step 1: Identify Measures that Contribute Directly to Your Annual Organization-wide Objectives
Ensure you select measures that can be directly used to quantify your most important annual objectives.
Step 2: Evaluate the Quality of Your Core Performance Indicators
Select a balance of leading and lagging indicators that are quantifiable and move your organization forward.
Step 3: Assign Ownership
All KPIs need ownership! It’s just that simple.
Step 4: Monitor and Report with Consistency
Whatever you do, don’t just select measures and not track them. Be consistent. We recommend selecting measures that can be reported upon at least monthly.
The 3 Common Types of KPIs to Reference as You Build Your Metrics
Key performance indicators answer the quantifiable piece of your goals and objectives. They come in three different flavors. Now that you know the components of great key performance indicators, here are some different ones that you might think about as you’re putting your plan together:
Broad Number Measures
The first type of KPI is what we like to call broad number measures. These are the ones that essentially count something. An example is counting the number of products sold or the number of visits to a webpage.
There is nothing wrong with these, but they don’t tell a story. Great measures help you create a clear picture of what is going on in your organization. So, using only broad ones won’t help create a narrative.
Progress key performance indicators are used to help measure the progress of outcomes. This is most commonly known as the “percent complete” KPI, which is helpful in measuring the progress of completing a goal or project. These are best when quantifiable outcomes are difficult to track, or you can’t get specific data.
Progress KPIs are great, but your KPI stack needs to include some easily quantifiable measures. We recommend using a mixture of progress KPIs and other types that have clear targets and data sources.
The final type of KPI is a change indicator. These are used to measure the quantifiable change in a metric or measure. An example would be, “X% increase in sales.” It adds a change measure to a quantifiable target.
The more specific change measures are, the easier they are to understand. A better iteration of the example above would be “22% increase in sales over last year, which represents an xyz lift in net-new business.” More expressive measures are better.
Change measures are good for helping create a clear narrative. It helps explain where you’re going instead of just a simple target.
Leading KPIs vs Lagging KPIs
Part of creating a holistic picture of your organization’s progress is looking at different types of measures, like a combination of leading and lagging indicators. Using a mixture of both allows you to monitor early warning signs closely when your plan is under or overperforming (leading) and you have a good hold on how that performance will impact your business down the road (lagging). Here’s a deep dive on leading versus lagging indicators:
We often refer to these metrics as the measures that tell you how your business might/will perform in the future. They are the warning buoys you put out in the water to let you know when something is going well, and when something isn’t.
For example, a leading KPI for an organization might be the cost to deliver a good/service. If the cost of labor increases, it will give you a leading indicator that you will see an impact on net profit or inventory cost.
Another example of a leading indicator might be how well your website is ranking or how well your advertising is performing. If your website is performing well, it might be a leading indicator that your sales team will have an increase in qualified leads and contracts signed.
A lagging indicator refers to past developments and effects.This reflects the past outcomes of your measure. So, it lags behind the performance of your leading indicators.
An example of a lagging indicator is EBITA. It reflects your earnings for a past date. That lagging indicator may have been influenced by leading indicators like the cost of labor/materials.
Balancing Leading and Lagging Indicators
If you want to make sure that you’re on track, you might have a KPI in place telling you whether you’re going to hit that increase, such as your lead pipeline. We don’t want to over-rotate on this, but as part of a holistic, agile plan, we recommend outlining 5-7 key performance indicators as part of your plan that are a mix of leading and lagging indicators when looking at performance monthly.
Having a mixture of both gives you both a look-back and a look-forward as you measure the success of your plan and business health. We also recommend identifying and committing to tracking and managing the same KPIs for about a year so you can create consistency in data and reporting.
27 KPI Examples
Sales Key Performance Indicators
- Number of contracts signed per quarter
- Dollar value for new contracts signed per period
- Number of qualified leads per month
- Number of engaged qualified leads in the sales funnel
- Hours of resources spent on sales follow up
- Average time for conversion
- Net sales – dollar or percentage growth
Increase the number of contracts signed by 10% each quarter.
Increase the value of new contracts by $300,000 per quarter this year.
Increase the close rate to 30% from 20% by the end of the year.
Increase the number of weekly engaged qualified leads in the sales from 50 to 75 by the end of FY23.
Decrease time to conversion from 60 to 45 days by Q3 2023.
Increase number of closed contracts by 2 contracts/week in 2023.
Examples of KPIs for Financial
- Growth in revenue
- Net profit margin
- Gross profit margin
- Operational cash flow
- Current accounts receivables
Financial KPIs as SMART Annual Goals
Grow top-line revenue by 10% by the end of 2023.
Increase gross profit margin by 12% by the end of 2023.
Increase net profit margin from 32% to 40% by the end of 2023.
Maintain $5M operating cash flow for FY2023.
Collect 95% of account receivables within 60 days in 2023.
Examples of KPIs for Customers
- Number of customers retained
- Percentage of market share
- Net promotor score
- Average ticket/support resolution time
Customer KPIs as SMART Annual Goals
90% of current customer monthly subscriptions during FY2023.
Increase market share by 5% by the end of 2023.
Increase NPS score by 9 points in 2023.
Achieve a weekly ticket close rate of 85% by the end of FY2023.
Examples of KPIs for Operations
- Order fulfillment time
- Time to market
- Employee satisfaction rating
- Employee churn rate
- Inventory turnover
Operational KPIs as SMART Annual Goals
Average 3 days maximum order fill time by the end of Q3 2023.
Achieve an average SaaS project time-to-market of 4 weeks per feature in 2023.
Earn a minimum score of 80% employee satisfaction survey over the next year.
Maintain a maximum of 10% employee churn rate over the next year.
Achieve a minimum ratio of 5-6 inventory turnover in 2023.
Marketing Key Performance
- Monthly website traffic
- Number of marketing qualified leads
- Conversion rate for call-to-action content
- Keywords in top 10 search engine results
- Blog articles published this month
- E-Books published this month
Marketing KPIs as SMART Annual Goals
Achieve a minimum of 10% increase in monthly website traffic over the next year.
Generate a minimum of 200 qualified leads per month in 2023.
Achieve a minimum of 10% conversion rate for on-page CTAs by end of Q3 2023.
Achieve a minimum of 20 high-intent keywords in the top 10 search engine results over the next year.
Publish a minimum of 4 blog articles per month to earn new leads in 2023.
Publish at least 2 e-books per quarter in 2023 to create new marketing-qualified leads.
Bonus: +40 Extra KPI Examples
Supply Chain Example Key Performance Indicators
- Number of On-Time Deliveries
- Inventory Carry Rate
- Months of Supply on Hand
- Inventory-to-Sales Ratio (ISR)
- Carrying Cost of Inventory
- Inventory Turnover Rate
- Perfect Order Rate
- Inventory Accuracy
- Fill Rate
Healthcare Example Key Performance Indicators
- Bed or Room Turnover
- Average Patient Wait Time
- Average Treatment Charge
- Average Insurance Claim Cost
- Medical Error Rate
- Patient-to-Staff Ratio
- Medication Errors
- Average Emergency Room Wait Times
- Average Insurance Processing Time
- Billing Code Error Rates
- Average Hospital Stay
- Patient Satisfaction Rate
Human Resource Example Key Performance Indicators
- Organization Headcount
- Average Number of Job Vacancies
- Applications Received Per Job Vacancy
- Job Offer Acceptance Rate
- Cost Per New Hire
- Average Salary
- Average Employee Satisfaction
- Employee Turnover Rate
- New Hire Training Effectiveness
Social Media Example Key Performance Indicators
- Average Engagement
- % Growth in Following
- Traffic Conversions
- Social Interactions
- Website Traffic from Social Media
- Number of Post Shares
- Social Visitor Conversion Rates
- Issues Resolved Using Social Channel
Conclusion: Keeping a Pulse on Your Plan
With the foundational knowledge of the KPI anatomy and a few example starting points, it’s important you build out these metrics with detailed and specific data sources so you can truly evaluate if you’re achieving your goals. Remember, these are going to be the 5-7 core metrics you’ll be living by for the next 12 months.
A combination of leading and lagging KPIs will paint a clear picture of your organization’s strategic performance and empower you to make agile decisions to impact the success of your team. If you’d like more information on how you can build better ones, check out the video above and click here to see why not all KPIs are created equal.
Our Other KPI Resources
We have several other great resources to consider as you build your organization’s Key Performance Indicators! Check out these other helpful posts and guides:
- OKRs vs. KPIs: A Downloadable Guide to Explain the Difference
- How to Identify KPIs in 4 Steps
- KPIs vs Metrics: Tips and Tricks to Performance Measures
- Guide to Establishing Weekly Health Metrics
- A Measure – The best KPIs have more expressive measures.
- A Target – Every KPI needs to have a target that matches your measure and the time period of your goal.
- A Data Source – Every KPI needs to have a clearly defined data source.
- Reporting Frequency – A defined reporting frequency.
FAQs on Key Performance Indicators
KPI stands for Key Performance Indicators. KPIs are the elements of your organization’s business or strategic plan that express what outcomes you are seeking and how you will measure their success. They express what you need to achieve by when. KPIs are always quantifiable, outcome-based statements to measure if you’re on track to meet your goals and objectives.
The 4 elements of key performance indicators are: