Key performance indicators (KPIs) are essential for any business that wants to track its progress, identify areas for improvement, and make data-driven decisions. Internal teams need to be able to prove their impact to the bottom line of the business and need to pick the right KPIs that prove their impact towards the business. Choosing the right KPIs early can help you measure success, prove value, and make better business decisions as you drive towards your objectives.
In this guide:
A key performance indicator (KPI) is a value that measures how effectively a company is performing towards key business objectives. Businesses use KPIs to monitor their progress towards reaching goals that range from high-level strategic KPIs to short-term operational KPIs.
KPIs help evaluate a company’s progress towards accomplishing key business objectives. KPIs help executives, managers, and employees identify where improvements can be made. Clearly defined KPIs can lead to more effective goal execution and positive impact to a business. One of the most essential KPIs is revenue, but many others can be used depending on a company’s goals.
KPIs must be selected so that they align with a company’s strategy and goals. They also need to be relevant to the industry, department, team, and skillset of the individual employee.
KPIs are wonderful tools, but only when quantifiable goals are set in advance. This is where objectives and key results (OKRs) are beneficial. OKRs are an essential tool for defining goals. Different companies and departments will use a different set of OKRs and KPIs to measure success.
Metrics vs. KPIs — what are the differences?
KPIs can be confused with metrics, but there’s a subtle difference. All KPIs are metrics, but not all metrics are KPIs. KPIs are a subset of metrics that are considered crucial for achieving strategic objectives. For example, website traffic is typically tracked as a metric and not as a KPI. A company that wants to increase online sales could choose website visitor conversion rate as a targeted KPI.
KPIs are strategic and measure performance based on specific business objectives and goals. Metrics measure the success of everyday business activities that support your KPIs.
Why are KPIs important?
KPIs play a vital role in helping businesses achieve their goals by:
- Keeping internal teams aligned. Example: KPIs can measure both project success and individual employee performance.
- Providing a business health check. Key performance indicators give a realistic look at the health of a business.
- Ensuring accountability across teams. Make sure everyone provides value with key performance indicators that help employees track which tactics will help achieve overall business goals.
Types of KPIs.
There are several types of KPIs that vary based on what industry a business is in and by different internal business departments. Common types of KPIs include:
Strategic.
Strategic KPIs provide a big-picture view of a company's health. Strategic KPIs guide executive decision-making and connect all business activities with the desired future state of a company. They prioritize the long-term impact and efficacy of strategies over short-term operational results. Executives typically use strategic KPIs that assess the health of a business such as return on investment (ROI) and profit margin.
Operational.
Operational KPIs measure the effectiveness of month-to-month or even day-to-day business process operations in real-time. These KPIs are often used by team members at a company across departments to analyze how individual team KPIs contribute to strategic KPIs. Operational KPI examples include sales by region, production output/volume, inventory turnover, and customer service resolution time.
Functional.
Functional KPIs are specific to different departments or functions within an organization. They can be used to measure the success of a marketing campaign, the efficiency of a sales team, or the effectiveness of a customer service department. It’s important to understand that KPIs are a subset of metrics, specifically those that are relevant to organizational goals. In certain cases, functional KPIs can fall under the strategic or operational KPI classification. For example, marketing KPIs might include website traffic, lead generation, and brand awareness, while sales KPIs might include conversion rates, average deal size, and customer lifetime value.
Leading and lagging.
Leading KPIs forecast future performance and help identify potential problems or opportunities. Examples include customer satisfaction and employee engagement. Lagging KPIs measure past performance and provide insights into what previously happened. Examples include the profit margin for a product.
Input KPIs measure the resources needed to produce desired results and output KPIs track the desired results that came from inputs or resources. Output KPIs help organizations evaluate the effectiveness of their efforts by measuring the results or outcomes achieved. . For example, an output KPI for a sales team might be the number of deals closed, or total revenue generated from sales.
Below are some KPI examples based on more senior roles to give you an idea of what KPIs can be for different departments or teams.
Marketing.
- Increase qualified leads by 10% in the next quarter
- Improve conversion rate by 5% in the next year
- Increase social media shares by 20% in the next six months
- Reduce customer acquisition cost (CAC) by 15% in the next year
- Increase customer lifetime value (CLV) by 10% in the next two years
- Improve brand awareness by 25% in the next year
- Increase website traffic by 15% in the next quarter
Online marketing.
- Reduce average cost per lead (CPL) by 10% in the next quarter
- Increase the number of conversions by 15% in the next month
- Improve pay-per-click (PPC) or Google Ads click-through rate (CTR) by 5% in the next two months
- Increase website or landing page conversion rate by 10% in the next quarter
- Increase share of voice by 20% in the next year
Content marketing.
- Increase recurring visitors by 25% in the next six months
- Increase website entries from blog posts by 15% in the next quarter
- Increase blog shares by 30% in the next two months
Partner marketing.
- Increase partner-generated revenue by 20% in the next year
- Improve ROI per partner by 10% in the next two years
- Increase partner market share by 15% in the next year
Sales.
- Increase sales or subscriptions by 25% in the next quarter
- Improve win rate or conversion rate by 10% in the next year
- Increase customer lifetime value (CLV) by 15% in the next two years
- Reduce customer acquisition cost (CAC) by 20% in the next year
- Improve customer retention rate by 5% in the next year
- Increase average deal size by 10% in the next quarter
Human resources.
- Improve employee satisfaction index by 10% in the next year
- Increase SCR (salary competitiveness ratio) by 5% in the next six months
- Improve retention rate by 8% in the next two years
- Reduce employee turnover rate by 10% in the next year
- Reduce cost per hire by 15% in the next year
Engineering.
- Increase sprint points completed by 15% in the next quarter
- Improve progress vs. schedule (deadlines successfully met) by 10% in the next year
- Reduce P-0 or P-1 active bugs in production by 20% in the next month
- Reduce rework by 15% in the next quarter
- Implement three architecture improvements in the next year
Quality assurance.
- Reduce the number of P-0 or P-1 bugs in the product by 25% in the next month
- Ensure 100% coverage of project requirements in the next quarter
- Achieve a 98% pass rate on all tests in the next month
Product management KPIs.
- Increase product engagement rate by 20% in the next six months
- Improve customer net promoter score (NPS) from product feedback by 10 points in the next year
- Increase customer retention by 5% in the next year
- Reduce customer complaints by 15% in the next quarter
Customer success.
- Improve customer NPS by 15 points in the next year
- Improve customer satisfaction (CSAT) score by 10% in the next year
- Increase customer retention rate by 8% in the next two years
- Reduce customer churn by 10% in the next year
Customer support.
- Reduce average response time by 20% in the next quarter
- Reduce average resolution time by 10% in the next year
- Reduce incident rate by 15% in the next six months
Customer retention.
- Improve customer satisfaction by 10% in the next year
- Improve NPS by 12 points in the next year
- Improve CSAT score by 8% in the next year
Finance.
- Improve working capital by 15% in the next year.
- Increase operating cash flow by 20% in the next quarter
- Reduce payroll headcount ratio by 5% in the next year
- Increase revenue by 10% in the next quarter
- Improve net profit margin by 5% in the next year
Operations.
- Improve labor utilization (employee ROI) by 10% in the next quarter
- Reduce project schedule variance (missed deadlines) by 15% in the next year
- Reduce rework (work that had to be done again) by 20% in the next six months
- Improve order fulfillment time by 10% in the next quarter
- Reduce customer order errors by 5% in the next month
KPI measurement considerations.
Measuring KPIs effectively requires a systematic approach that involves these steps:
- Set clear goals: Define specific, measurable, achievable, relevant, and time-bound goals. These goals will dictate whether KPIs are measured effectively.
- Identify relevant KPIs: Choose KPIs that are directly aligned with your goals and provide meaningful insights into your performance.
- Collect and analyze accurate data: Gather accurate and reliable data from master data sources, such as website tracking and analytics, financial reports, and CRM dashboards.
- Visualize data: Present the data using dashboards, charts, and reports to tell a compelling story that fosters alignment between executives and marketers.
- Turn insights into action: Use the insights gained from the data to make informed decisions and take action to improve performance and elevate business health.
How to choose KPIs.
Measuring KPIs can give your team guidance on how to adjust tactics to ensure business goals are achieved. However, KPI measurement is futile if internal teams end up wasting a bunch of time to get the data. Organizations and internal teams can avoid this by measuring KPIs that achieve high-level organizational goals. If you’re collecting data without a specific KPI in mind, then adjust KPIs to ensure you’ve chosen the right KPIs that will help evaluate whether your team can achieve objectives, like being more cost efficient or improving the quality of your deliverables.
Defining KPIs clearly and aligning these definitions from C-suite executives to data analysts will help avoid pulling unnecessary data. Additionally, choosing the right data sources, ensuring tracking attribution is correct, and finding ways to automate data collection can all help reduce the time needed to use data to tell performance stories to internal teams. Teams should also review master data sources and clean any data that could cause performance KPI misattribution.
Start measuring the right key performance indicators in Adobe Workfront so you can show your company that you and your team are an invaluable and integral part of the success of the business. Adobe Workfront has features such as Status Reports and Data Connect to help track and measure KPI performance so internal teams can show their value to the business.
