Key Performance Indicators (KPI) are a set of quantifiable measures that a company or industry uses to gauge and compare performance in terms of meeting their strategic and operational goals.
KPIs vary between companies and industries, depending on their priorities or performance criteria. Also referred to as "key success indicators (KSI)".
Why Use KPI’s
- Performance effectiveness.
- For the accuracy, actual reflection of the process, efficacy in delivering the outcome.
- The effects of a change can be monitored reliably, repeatedly and accurately by KPI.
How to design KPI’s
- KPIs should be clearly linked to the strategy, i.e. the things that matter the most.
- KPIs have to provide the answers to our most important questions.
- KPIs should be primarily designed to empower employees and provide them with the relevant information to learn.
Identifying the KPI’s
- Related to strategic aims.
- Identify what makes the organization success or failures.
- Controllable and accountable.
- Qualitative and quantitative.
- Long term and short term.
- Consider Stakeholder needs.
- Identify important aspects.
- Establish Company Goals and KPIs.
- Select Performance Indicators and Metrics.
- Set Targets and Track Performance.
Types of KPI’s
- Process KPIs - measure the efficiency or productivity of a business process. Examples - Days to deliver an order.
- Input KPIs - measure assets and resources invested in or used to generate business results. Examples - Dollars spent on research and development, Funding for employee training, Quality of raw materials.
- Output KPIs - measure the financial and nonfinancial results of business activities. Examples – Revenues.
- Leading KPI measure activities that have a significant effect on future performance.
- Lagging KPI is a type of indicator that reflect the success or failure after an event has been consumed. Such as most financial KPIs, measure the output of past activity.
- Outcome KPI - Reflects overall results or impact of the business activity in terms of generated benefits, as a quantification of performance. Examples are customer retention, brand awareness.
- Qualitative KPI - A descriptive characteristic, an opinion, a property or a trait. Examples are employee satisfaction through surveys which gives a qualitative report.
- Quantitative KPI - A measurable characteristic, resulted by counting, adding, or averaging numbers. Quantitative data is most common in measurement and therefore forms the backbone of most KPIs. Examples are Units per man-hour
Characteristics of a good KPI
- KPI is always connected with the corporate goals.
- A KPI are decided by the management.
- They are the leading indicators of performance desired by the organization.
- Easy to understand
- Key Success Factors (KSFs) only change if there is a fundamental shift in business objectives.
- Key Performance Indicators (KPIs) change as objectives are met, or management focus shifts.
KPIs are usually developed following the well-known S.M.A.R.T.
criteria originally developed by George T. Doran (Management Review, 1981) and popularized by Peter Drucker.
- Result-oriented or Relevant
Shipping and Logistics Examples
The main five KPI’s in shipping and logistic industries are:
- Sales forecasts.
- Procurement and suppliers.
Infrastructure sector Examples
The main five KPI’s in Infrastructure sector are:
- Client Satisfaction.
- Construction Time & Cost.
KPI Project Management Examples
There are numerous KPI types that exist within the project management space; a few key examples would be the following:
- Estimate to project completion
- Number of unresolved issues
- Current resource allocation
- Labor costs spent (per month)
- Current development backlog
- Project schedule (Agile or Waterfall)
- Issues found in code review
- Issues found by QA
- Issues found by customers
PMO KPI Examples
See PMO KPIs
Financial Performance: Examples
- Net Profit
- Net Profit Margin
- Gross Profit Margin
- Operating Profit Margin
- Revenue Growth Rate
- Total Shareholder Return (TSR)
- Economic Value Added (EVA)
- Return on Investment (ROI)
- Return on Capital Employed (ROCE)
- Return on Assets (ROA)
- Return on Equity (ROE)
- Debt-to-Equity (D/E) Ratio
- Cash Conversion Cycle (CCC)
- Working Capital Ratio
- Operating Expense Ratio (OER)
- CAPEX to Sales Ratio
- Price Earnings Ratio (P/E Ratio)
- Net Promoter Score (NPS)
- Customer Retention Rate
- Customer Satisfaction Index
- Customer Profitability Score
- Customer Lifetime Value
- Customer Turnover Rate
- Customer Engagement
- Customer Complaints
Market and marketing efforts: Examples
- Market Growth Rate
- Market Share
- Brand Equity
- Cost per Lead
- Conversion Rate
- Search Engine Rankings (by keyword) and click-through rate
- Page Views and Bounce Rate
- Customer Online Engagement Level
- Online Share of Voice (OSOV)
- Social Networking Footprint
- Klout Score
Operational Performance: Examples
- Six Sigma Level
- Capacity Utilisation Rate (CUR)
- Process Waste Level
- Order Fulfilment Cycle Time
- Delivery In Full, On Time (DIFOT) Rate
- Inventory Shrinkage Rate (ISR)
- Project Schedule Variance (PSV)
- Project Cost Variance (PCV)
- Earned Value (EV) Metric
- Innovation Pipeline Strength (IPS)
- Return on Innovation Investment (ROI2)
- Time to Market
- First Pass Yield (FPY)
- Rework Level
- Quality Index
- Overall Equipment Effectiveness (OEE)
- Process or Machine Downtime Level
- First Contact Resolution (FCR)
Employees and Their Performance: Examples
- Human Capital Value Added (HCVA)
- Revenue Per Employee
- Employee Satisfaction Index
- Employee Engagement Level
- Staff Advocacy Score
- Employee Churn Rate
- Average Employee Tenure
- Absenteeism Bradford Factor
- 360-Degree Feedback Score
- Salary Competitiveness Ratio (SCR)
- Time to Hire
- Training Return on Investment
Environmental and Social Sustainability Performance: Examples
- Carbon Footprint
- Water Footprint
- Energy Consumption
- Saving Levels Due to Conservation and Improvement Efforts
- Supply Chain Miles
- Waste Reduction Rate
- Waste Recycling Rate
- Product Recycling Rate