Reviewing Performance Through Key Performance Indicators (KPIs)

Reviewing performance through key performance indicators (KPIs) tells your team when you've met the mark or fallen short. If you want to scale your company, you might be wondering about KPIs and how they can help your business grow. But how do you pick the right KPIs for your business?

In this post, we'll walk you through what a KPI is, which KPIs you should focus on, and how you can hone in on the metrics that matter most for your business.

What is a KPI?

KPI is an acronym for key performance indicator. KPIs measure performance and progress toward a specific goal over time. They help keep the primary goals of a business at the forefront.

Whether a KPI is for a one-off campaign or a long-term initiative, it can help teams track their progress, improve results, and stay on track.

Businesses use KPIs to figure out whether they are reaching their top goals. These KPIs usually track the overall health and performance of the organization. Departments use KPIs to show the value of their efforts to the business, while employees use KPIs to understand how their individual efforts contribute to project, team, and organizational goals.

KPIs can also help track the effectiveness of:

Projects
Processes
Campaigns
Strategic changes

Important Note:

KPIs should measure your most essential indicators. For instance, your social media team may have many data points that can serve as KPIs. However, they should only choose the ones that align with the broader business goals.

Why are KPIs Important?

People around the world generated and consumed 64.2 zettabytes in 2020, and according to Statista, that number should reach 181 zettabytes by 2025.

This overwhelming data influx makes it crucial for businesses to focus on KPIs that simplify decision-making. KPIs distill complex data into concise insights, pushing teams to be more productive and align on common goals. Strong KPIs help businesses save time, gather critical insights, guide management, and maintain long-term growth trajectories.

However, selecting the wrong KPI can misalign efforts and derail even the strongest teams. For example, tracking irrelevant metrics like low-traffic keywords for a blog can waste resources and obscure actionable insights.

Types of Key Performance Indicators

While businesses can measure various performance indicators, most fall under these categories:

Quantitative KPIs
Metrics like closed sales, customer service tickets, and annual revenue.
Qualitative KPIs
Data like customer feedback or employee engagement. For example, qualitative KPIs may include product reviews or survey responses.

Other KPI Categories:

Leading KPIs: Forecast potential responses to changes (e.g., website traffic).
Lagging KPIs: Track results after changes (e.g., revenue).
Input KPIs: Monitor resources needed for processes or projects.
Process KPIs: Assess how well a process is functioning (e.g., ticket resolution times).
Practical KPIs: Examine how internal processes affect the company.
Directional KPIs: Focus on trends in performance or competition.
Actionable KPIs: Measure progress in areas like employee sentiment or DEI initiatives.

KPIs vs. Metrics

A KPI can be a metric, but not every metric is a KPI. KPIs track progress toward specific goals and represent key measures of performance. Metrics, while still useful, often provide supplementary details to refine processes and resolve challenges.

KPI Example:

A blog team may track KPIs such as:

Traffic
New users
Leads

At the same time, they might track additional metrics like bounce rates or domain authority to support their KPIs.

OKR vs. KPI

While KPIs and OKRs (Objectives and Key Results) both measure performance, they differ in focus:

KPIs track whether your business is hitting its targets and often act as "health metrics."
OKRs outline ambitious, big-picture objectives with specific measurable results.

Example:

A company’s OKR might be to "become a top 10 provider in the industry by 2024," with key results like:

Acquiring 1,000 new customers by Q3.
Generating 3,000 leads monthly.
Increasing annual sales by 30%.

KPIs, on the other hand, may focus on metrics like "number of new leads."

How to Determine KPIs

Choose KPIs aligned with your business goals.
For example, if increasing sales is a goal, track KPIs like monthly revenue or customer acquisition cost.
Consider your company’s growth stage.
Startups might focus on business validation metrics, while enterprises prioritize metrics like lifetime customer value.
Use both leading and lagging indicators.
Leading indicators predict trends, while lagging indicators track results. Together, they provide a holistic view.
Focus on a few key metrics.
Avoid tracking too many KPIs to maintain focus.

KPI Examples

Your KPIs should reflect your industry and business model. Here are a few examples:

Marketing KPIs

Return on Investment (ROI)
Customer Lifetime Value (LTV)
Customer Acquisition Cost (CAC)
Conversion Rate

Sales KPIs

Monthly sales growth
Opportunity-to-deal ratio
Average purchase value

Service KPIs

Number of resolved tickets
Customer satisfaction score (CSAT)
Net Promoter Score (NPS)

Website KPIs

Traffic
Traffic sources
Number of sessions

How to Measure KPIs

Identify tools/software for data collection.
Finalize your list of KPIs.
Standardize reports and reporting frequency.
Design clear dashboards for visualization.
Share reports with stakeholders for validation.
Set new goals based on results.

By measuring the right KPIs and refining them over time, you can focus your efforts, track progress, and scale your business effectively.

Use Your KPIs to Fuel Growth

KPIs are a powerful tool for tracking progress and fostering business growth. By selecting and monitoring the right KPIs, you can prioritize effectively and align your organization’s goals with actionable insights.