As your organization builds the foundation of your strategic plan, it’s likely to come to your attention you’ll need to gain consensus around what your key performance indicators (KPIs) will be and how they will impact your plan. If you don’t know the basics of KPIs or need guidance on KPI development, we are here to help!
We’ve compiled a complete guide that includes an overview of what makes a good KPI, the benefits of good key performance indicators (KPIs), and a list of KPI examples organized by department and industry to reference build your organization’s strategic plan and goals.
Key performance indicators, or KPIs, are the elements of your organization’s plan that express the quantitative outcomes you seek and how you will measure success. In other words, they tell you what you want to achieve and by when.
They are the qualitative, quantifiable, outcome-based statements you’ll use to measure progress and determine if you’re on track to meet your goals or objectives. Good plans use 5-7 KPIs to manage and track their progress against goals. A good key performance indicator measures strategic goals.
Key performance indicators are intended to create a holistic picture of how your organization is performing against its intended targets, organizational goals, business goals, or objectives. A great key performance indicator should accomplish all the following:
These are the heartbeat of your performance management process and must work well! Your plan’s strategic KPIs tell you whether you’re making progress or how far you are from reaching your goals. Ultimately, you want to make progress against your strategy. You’ll live with these KPIs for at least the quarter (preferably the year), 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:
An indicator is a general term that describes a business’s performance metrics.
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, which is a MUST!
On the other hand, a key performance indicator is a very specific indicator that measures an organization’s progress toward a specific company-wide goal or objective. We typically recommend you narrow down the KPIs your organization tracks to no more than 7. When you track too many goals, it can get daunting and confusing.
Pro Tip:
You should only track the best and most valuable indicators that tie to your organization’s long-term strategic goals and direction.
What benefits do key performance indicators 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 as they help you track progress of your goals. Implementing them correctly is critical to success.
We’ve covered this extensively in our How to Identify Key Performance Indicators post. But, here’s a really quick recap:
Ensure you select measures that can be directly used to quantify your most important annual objectives.
PRO TIP:
It doesn’t matter what plan structure you’re using – balanced scorecard, OKRs, or any other framework – the right KPIs for every objective will help you measure if you’re moving in the right direction.
Select a balance of leading and lagging indicators (which we define later in the article) that are quantifiable and move your organization forward. Always ensure you have relevant KPIs. Having the right key performance indicators makes a world of difference!
Every key performance indicator needs ownership! It’s just that simple.
Whatever you do, don’t just set and forget your goals. We see it occasionally that people will select measures and not track them, but what’s the point of that? Be consistent. We recommend selecting measures that can be reported upon at least monthly.
Key performance indicators answer the quantifiable piece of your goals and objectives. here are three types of KPIs. 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:
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.
PRO TIP:
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.
PRO TIP:
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 and is usually measured as a percentage increase in a given period of time.
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.
PRO TIP:
Change measures are good for helping create a clear narrative. It helps explain where you’re going instead of just a simple target.
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 progress and early warning signs closely when your plan is under or over-performing (leading indicator) and you have a good hold on how that performance will impact your business down the road (lagging indicator). Here’s a deep dive and best practices on using 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.
If you want to ensure that you’re on track, you might have a KPI in place telling you whether you will 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 metrics or indicators in your plan that show a mix of leading and lagging indicators..
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. A balanced set of KPIs also gives you the data and business intelligence you need for making decision making and strategic focus.
We also recommend identifying and committing to tracking and managing the same KPIs for about a year, with regular monthly or quarterly reporting cadence, to create consistency in data and reporting.
Any shorter tracking time frame won’t give you a complete picture of your performance. Always moving your KPI targets is also a sure way to miss how you’re actually performing.
Sales KPIs are essential metrics for evaluating a company’s revenue generation process and leading indicators for achieving financial goals. Using sales performance KPIs can provide leading insights beyond traditional financial metrics, which are often considered lagging indicators
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 2024.
Increase number of closed contracts by 2 contracts/week in 2024.
Grow top-line revenue by 10% by the end of 2024.
Increase gross profit margin by 12% by the end of 2024.
Increase net profit margin from 32% to 40% by the end of 2024.
Maintain $5M operating cash flow for FY2024.
Collect 95% of account receivables within 60 days in 2024.
90% of current customer monthly subscriptions during FY2024.
Increase market share by 5% by the end of 2024.
Increase NPS score by 9 points in 2024.
Achieve a weekly ticket close rate of 85% by the end of FY2024.
Average 3 days maximum order fill time by the end of Q3 2024.
Achieve an average SaaS project time-to-market of 4 weeks per feature in 2024.
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 2024.
Achieve a minimum of 10% increase in monthly website traffic over the next year.
Generate a minimum of 200 qualified leads per month in 2024.
Achieve a minimum of 10% conversion rate for on-page CTAs by end of Q3 2024.
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 2024.
Publish at least 2 e-books per quarter in 2024 to create new marketing-qualified leads.
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 will be the 5-7 core metrics you’ll live by for the next 12 months, so it’s crucial to develop effective KPIs that follow the SMART formula.They should support your business strategy, measure the performance of your strategic objectives, and help you make better decisions.
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 your team’s success.
The StrategyHub by OnStrategy is a purpose built tool to help you build and manage a strategic plan with KPIs. Run your strategy reviews with zero prep – get access to our full suite of KPI reports, dynamic dashboards for data visualization, access to your historical data, and reporting tools to stay connected to the performance of your plan. Get 14-day free access today!
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:
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.
What are the 4 elements of key performance indicators?The 4 elements of key performance indicators are:
Are KPIs the same as metrics?No, KPIs (Key Performance Indicators) are different from metrics. Metrics are quantitative measurements used to track and analyze various aspects of business performance, while KPIs are specific metrics chosen as indicators of success in achieving strategic goals.
HI Erica
hope your are doing well,
Sometime Strategy doesn’t cover all the activities through the company, like maintenance for example may be quality control …. sure they have a contribution in the overall goals achievement but there is no specific new requirement for them unless doing their job, do u think its better to develop a specific KPIs for these department?
waiting your recommendation
