KPI is an acronym for Key Performance Indicator. KPIs are metrics that represent your company performance. The business benefit of KPIs is creating a means to measure how well your business is meeting its operational objectives. What KPIs measures defines how well a business is running.
To select KPIs for your organization consider the following questions to guide your selection process.
- What are the company's objectives? KPIs need to reflect the objective of the business to be valuable. Start with understand what the purpose of the business.
- What metrics will serve my boss's or team's needs immediately? KPIs need to have a natural urgency based on the business performance they are meant to measure. That means understanding what KPIs the boss or management teams needs to access quickly.
- What defines a successful KPI metric? For example, let's say a bounce rate is a KPI. A high website bounce rate (above 40%) is an indicator of poor website performance. So a bad KPI in this instance is a bounce rate above 40%. Consider this approach, and make sure your team can imagine what a successful KPI should be.
- Is the KPI easily understood by the stakeholders? There may be a few metrics that your team needs to understand, but ultimately before a dashboard is created, the team who will manage that dashboard must appreciate the metrics encountered.
Sometimes other influences can play into a KPI. To see how social media can be a factor, read the post "When KPIs Socialize".
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