There are different types of KPIs that are difficult to choose when measuring your business objectives. Therefore, before defining the types of performance indicators, it is first important to understand what KPIs are, and how they can help you obtain a strategic vision of your business.
In this article, you will learn about the types of KPIs, and how you can use them in your business efforts. Through these measurement indicators, we will show you some examples of KPIs from some sectors. Continue reading!
What are KPIs?
The KPIs, or (key performance indicators), are management tools used by companies around the world. In addition, they serve to measure and evaluate the performance of your processes and manage them in the most effective way.
Key performance indicators can be used in different areas of a company such as: sales KPIs, human resources, finance, marketing, logistics, etc. However, all of these have quantifiable values (numbers) and a comparative basis, in order to measure whether or not the company is advancing in relation to its established objectives.
The structure of a KPI is based on these 4 aspects:
- A measure: The KPI must have a measure. The best KPIs have more expressive measures.
- A goal: Every KPI should have a goal that matches its measurement and time period. These are generally the numerical values you are looking to achieve.
- A data source: You must have a clearly defined data source so that there are no errors in the way each data is measured and tracked.
- Reporting Frequency: A good rule to follow is to report results at least monthly, quarterly, and annually.
Why use KPIs?
To define good KPIs, it is necessary to start from the strategic objectives common to the entire company, and then aim at the periodic achievement of operational objectives. In addition, KPIs allow you to study the results and adjust processes or resources to achieve short-term results. In this way, the KPIs are part of a progress approach, in addition, they access the direction and monitoring of these 3 activities such as:
- Measure progress toward specific goals: By tracking key performance indicators, companies can see how they are performing against specific goals and make adjustments as necessary to stay on track.
- Identify strengths and weaknesses: By tracking quantitative and qualitative KPIs, companies can identify areas of strength and weakness in their operations. This information can be used to make strategic decisions about where to focus future efforts.
- Monitor overall performance: By tracking KPIs over time, businesses can get a bigger picture of their overall performance and identify trends. This information can be used to make informed decisions about resource allocation.
Difference between KPI and metric
Key performance indicators (KPIs) are a type of performance measurement that helps organizations track and evaluate progress toward their goals. AmetricsIt is a quantifiable measure used to track progress and evaluate success.
In particular, business measures are used in order to track progress and performance on a company’s objectives.
How to measure KPIs
There are several ways to measure KPIs or key performance indicators. Depending on the organization and specific objectives, KPIs can be tailored to provide the most relevant and useful information. However, some common methods to measure KPIs are: surveys, interviews, discussion groups, and data analysis from a website, social networks, etc.
Now that you understand the different types of KPIs, it’s important to know how to classify them. To do this, you must first identify your organization’s objectives and then select the KPIs that best help you evaluate this progress.
Types of KPIs
KPIs are data and variables that make your company’s performance measurable. Each company sets short and long-term strategic objectives. By associating these objectives with KPIs, the results achieved can be accurately measured. Therefore, take constant and effective measurements in your business strategy.
Without key performance indicators, your efforts likely won’t be visible or measurable. Now that we understand what KPIs are and why they are important, let’s take a closer look at the types of KPIs you need in your business.
As any sales manager knows, KPI indicators are essential for tracking progress and ensuring your team members are meeting business goals. There are several KPIs that can be used, but some of the most important are: conversion rate, average deal size and win rate, and sales cycle, among others.
The conversion rate measures the percentage of potential customers that become customers. Average transaction size measures the average value of each sale. On the other hand, the win rate calculates the percentage of sales that are successfully closed. By tracking these types of indicators on a regular basis, sales managers can ensure that their team is performing at a high level and identify any areas that need improvement. Other examples of sales KPIs are:
- Average ticket
- CAC (customer acquisition cost)
- Number of businesses completed
- Sales cycle
- Number of leads generated
- Number of qualified leads
Social Media KPIs
If you are in charge of marketing for a social media platform (it is important that you know the key performance indicators for Facebook, Instagram, TikTok, and YouTube among others). Some of the most important KPIs are engagement rate, reach, impressions, and click-through rate.
Engagement rate measures how often users interact with your content, reach indicates the total number of people who have seen your posts, and click-through rate measures how often users click on the content. links from your posts. Tracking these KPIs will allow you to see the effectiveness of your social media marketing efforts and make any necessary adjustments to improve the results of your digital presence.
There are a number of key financial KPIs (Key Performance Indicators) that every CEO should monitor regularly. This type of KPI will provide you with valuable information about the health of your company. On the other hand, it can help you make better decisions about where to invest your resources. Some examples of financial KPIs are:
- Revenue: This is the total amount of money your company brings in through sales and other sources of income. It’s important to track revenue so you can see how your business is performing over time.
- Profits: It is the difference between income and expenses. The objective is to achieve a high profit margin, in order to be able to reinvest the money in the company and continue growing.
- Asset turnover ratio: Measures how efficiently your company uses its assets to generate income, and whether it is in a healthy financial position.
- Debt Ratio: Measures the amount of debt your company has compared to the amount of equity it has. A high debt-to-equity ratio is not ideal as it indicates that the company is not in a strong financial position.
These are just some of the most important financial KPIs you should track. By implementing KPIs, you will be able to make informed decisions about the health of your business and where to focus your efforts to improve performance.
Human resources departments have a number of important responsibilities, from hiring and training employees to managing payroll and workplace benefits.
To effectively manage these functions, HR professionals rely on a series of performance indicators, or KPIs. Some of the most common HR KPIs are employee satisfaction, turnover rate, and time to hire.
Using these performance indicators, you can identify the areas that need to be optimized, and how to evaluate employee needs. On the other hand, HR KPIs guarantee that the company is able to attract and retain the best talent. In turn, this can lead to better financial performance and be a competitive advantage in the market.
Production KPIs are a vital part of any manufacturing process. By implementing this KPI, manufacturers can identify areas they need to optimize in order to make operations more efficient. Some examples of production KPIs are: cycle time, scrap rate, and throughput.
Cycle time is the total period it takes to complete a production cycle, from start to finish. Scrap rate is the percentage of material that is wasted during production. Performance is the percentage of products that meet quality standards.
There are a variety of KPIs that can be used to measure the success of a logistics operation. Some of the most important KPIs are:
- The cost per unit
- Delivery on time
- Order Accuracy
- Customer satisfaction
From the implementation of the logistics KPI – you can identify the areas in which you need to improve – in order to minimize costs and maximize efficiency. In addition, these examples of logistics KPIs can compare the performance of other strategic operations, providing the best possible service to your customers.
As you can see, there are a wide variety of types of KPIs that companies can track to measure their performance. By understanding which performance indicators are most important for your industry and your specific goals, you can develop a comprehensive strategy to track and improve your company’s success.