What Are KPIs? Key Performance Indicators Explained

The professional world is jam-packed full of jargon, abbreviations and business terminology that isn’t always obvious, especially to those just starting out on their career. One such example that you’ll see all over job adverts and hear thrown around in the office is a ‘KPI’. So, what are KPIs and why are they important?

Even experienced professionals who discuss KPIs all day may struggle to provide a definition. They are so ingrained into day-to-day working life that asking what are KPIs? seems arbitrary. However, according to KPI and Big Data guru, Bernard Marr, a misunderstanding of KPIs is preventing businesses from using them to their full potential. Therefore, in order to make the most of KPIs, it’s helpful to have a solid understanding of them.

What are KPIs? The basics

Before delving into the ins and outs, it’s helpful to strip things back. What are KPIs? Well, KPIs is an acronym for key performance indicators. Still puzzled?

Every company has business objectives and strategic goals they want to reach. Analysing the performance and successes of specific, measurable business areas is a great way to see if things are on track. That’s where KPIs come in. KPIs are a business metrics tool used to measure business performance in relation to targets and goals and provide insight into how things can be improved.

High-level vs. low-level KPIs

KPIs aren’t just used to keep an eye on the worker bees, they really are vital to business optimisation. Key performance indicators are implemented at all levels, this is the only way to get full visibility over the functioning of an organisation. This means that there are both high-level and low-level KPIs that can be put in place.

  • High-level KPIs: These relate to the overall performance of a business as a whole. These can include Customer Satisfaction, Annual Recurring Revenue and Annual Growth. Given the nature of these types of KPIs, individual employees don’t have a direct impact on them. They are a result of a culmination of low-level KPIs and the work of various teams or departments.
  • Low-level KPIs: This type of KPI refers to the performance of individual departments, teams or employees. They relate to the day-to-day duties of workers and can be improved or controlled much more easily.

Types of KPI

Think of a business as a machine. A machine has different parts that perform different functions to keep the entire unit going. A company is the same; numerous departments work on varying tasks to contribute to the overall objective. As such, KPIs aren’t limited to one business area, they focus on every facet of the operation.

That being said, there are some fundamental KPIs employed by most businesses. These include:

Whether assessed at high or low-level, these together encompass an endless number of KPIs and can cover all bases.

How KPIs are used

It’s clear to see that KPIs are a useful tool to help bosses assess everything from the performance of marketing campaigns, to financial metrics. Thanks to advances in technology, pulling a KPI report or viewing real-time analytics is easier than ever.

Bosses, therefore, have a wealth of information at their fingertips. KPIs are used not only to monitor employee performance but to review it an implement any major business changes. So, selecting the right KPIs, analysing them effectively and acting accordingly could help propel a business to success. What are KPIs? Massively important, that’s what!

Which jobs require KPIs?

How do KPIs affect your day-to-day work? Managers are more able to support their teams if they have measurable evidence of performance.  In any role, it’s likely that you will have to meet certain KPIs. However, there are certain professions in which they are more commonplace.

Target-related jobs such as sales, marketing, customer service and call centre-based positions are usually hugely focused on hitting KPIs. Sales figures, website hits, repeat purchase, customer satisfaction, call times – these are all examples of just some of the KPIs that are monitored in such roles.

Summary

What are KPIs? Key performance indicators (KPIs) do just what they say on the tin. They are measurable indicators of business performance at different levels. They allow businesses to see where they are in relation to their objectives and where there are areas for improvement. They can have a huge impact on the efficiency and productivity of a company, and so, when used properly, are a vital commercial tool.

Most jobs require KPIs, so be prepared to work hard to meet them! However, don’t be afraid of KPI targets, they’re not just there to challenge you, they’re there to help you.

For more business insights – take a look at our blog!

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