Performance indicators examples categories importance and best practices
KPI is an acronym for Key Performance Indicator, or Key Performance Indicator, used to measure whether the company’s processes are leading to the expected results and to support strategic decisions. In this article we will provide you the examples of Performance indicators.
What is KPI
If you still don’t know what KPI means, the time to clarify this question has come. KPI is an acronym for Key Performance Indicator or Key Performance Indicator.
In addition to the definition of the acronym, KPIs are indicators used to measure whether the company’s processes or actions are having the expected result .
Why? Because what is not measured cannot be evaluated or improved. If you still haven’t seen this in practice, performance indicators will help.
It is important to be clear that when we talk about measurement through a KPI, we are talking about numbers or percentages . Thus, your company will have concrete data to assess its own situation.
With all this, performance indicators, or performance indicators, are an essential part of an organization’s management strategy.
The reason is that, with KPIs, it is possible to monitor the effectiveness of processes, set plausible goals and define the paths to achieve them.
For this to work, you must keep in mind that an indicator is formed by:
- measure : every performance indicator, or performance indicator, needs to have a measure;
- Purpose : It also needs to have a purpose, objective, or target that relates to your measurement. In general, something that translates to another number that represents a desired outcome;
- data source : still, KPIs need to have a well-defined data source so that the information collected is solid and “clean”, allowing a truly strategic measurement;
- reports : performance indicators allow monitoring the situation and evolution of processes and actions. For this reason, reports are needed for comparisons and other analyses.
The categories of performance indicators
Moving forward, it is important for you to know that there are three categories of KPI indicators. Check out!
Primary KPIs are so called because they are defined first because they relate directly to the company’s strategic priorities .
Another way to understand is to consider that these performance indicators are usually the ones that most attract the attention of members of top management.
Remember turnover as a KPI and its relationship with costs? This can be an example, even considering that, from it, secondary KPIs can be defined.
The idea is that the secondary KPIs serve as a basis for you to know if you have achieved the expected value on the primary KPI.
Following suit, if your company has defined employee satisfaction or organizational climate as factors linked to high turnover , these are your secondary KPIs.
Continuing with what we are saying, the secondary KPIs are those that justify the primary KPIs by showing how the expected results should be achieved.
That’s why we mentioned the relationship between the satisfaction index and turnover . We are therefore talking about indicators that show whether the strategies adopted are working or not.
Finally, practical KPIs are the ones that explain the results obtained with the primary and secondary KPIs .
Therefore, we talk about issues that need to be measured and analyzed to understand why the value of an indicator has increased or decreased. Something that helps to better direct the strategies.
The importance of indicators
The lack of strategic planning is among the most common reasons for the early closing of a company.
One of the elements that make up this planning is data, relevant information that can guide senior management in decisions that impact the future of the business.
As we pointed out, a good way to get useful data is by identifying and implementing KPIs. The use of indicators allows the analysis and continuous improvement of the company’s processes and actions .
There are managers who have a vision more adapted to the business world and, therefore, may be able to make some decisions almost instinctively and get a good answer.
Leading a company to success, however, is not something that depends on luck or instinct, although these elements can help.
It is necessary to think strategies in a… strategic way. The redundancy is purposeful to emphasize that guesswork is not the way, but concrete information. Data that KPIs can provide.
Of course, even with the data in hand, it may be necessary to test, fail and get it right. The difference is that a north will already be drawn, which considerably increases the chances of success.
KPIs and human resources
We highlighted top management earlier because we focused on the importance of KPIs for the company as a whole. It turns out that indicators also have an impact on every department of the organization.
The turnover was just one example. HR can and must adopt performance indicators that relate to its actions if it wants to become a more strategic sector.
What we want with this brief clarification is to prevent you from getting the false impression that KPIs are only important for the so-called C-Level of a company.
Main examples of performance indicators
Remember how we explained that a KPI comes from a metric? Therefore, basically everything that can be measured has the potential to become a performance indicator.
This means that it is not feasible to list all the possibilities in one post, but we can present you with the main KPI examples. Come on?
Making a profit is one of the most common goals of a business. Therefore, the profitability KPI is one of the most used among financial indicators.
This is because a well-designed business strategy does not only consider whether, at each end of the month, the balance is positive for the company. A more robust analysis is needed.
The idea is to calculate profits, extract fixed and variable expenses and, only then, determine if the company’s situation is really favorable. In other words, to determine whether the expected results are being achieved or not .
The profitability indicator is translated into a percentage. If the value obtained is positive, but there is no money available, it is a sign that the company needs to reduce its costs .
Therefore, we talk about a KPI that can be very useful for decision making .
Average ticket value
Another of the main indicators used in the corporate world are sales KPIs , which make it possible to measure and understand the dynamics of sales made by the company .
There are different ways to track this dynamic: per sale , per customer or per salesperson. In any case, it is possible to compare the dynamics of the sector and its results, and identify improvements to be made.
Namely, by using the average ticket KPI, your company can obtain information such as which customers buy the most and which are the most loyal.
This data can, for example, be used to design new personalized service strategies, ensuring more positive experiences.
In turn, when the indicator focuses on the average ticket per salesperson, it is possible to assess which ones perform better. Something that gives scope to seek reasons and ways to better prepare or motivate the team.
Another issue that greatly impacts the success of a business is its relationship with the consumer public.
Therefore, we have the efficiency indicator that allows us to measure the customer satisfaction that the company .
The idea is to know if the customer:
- would buy or re-hire your company;
- would recommend the company ― its products or services ― to others;
- whether or not you found the service satisfactory, etc.
The NPS survey , the one that suggests indicating from 1 to 10 how likely the customer is to recommend the company and so on, is one of the most used tools for this measurement.
Note, therefore, that we are talking about one of the simplest performance indicators to implement, as a simple survey by email or message can do the trick.
Turning our eyes to the internal context of the company again, one of the main KPIs is what measures absenteeism. Here, we are talking about an indicator that is of direct interest to HR.
As you may already know, absenteeism is that “unjustified absence of employees” at work , situations that escape the absences provided for by the CLT .
This is an important KPI, because a high absenteeism rate represents financial loss and reveals that there may be issues that the company needs to investigate.
Lack of motivation, inadequate salary, leadership problems and lack of flexibility or growth perspective are some of the possible reasons.
Still within what matters to HR, another performance indicator that draws a lot of attention is what measures employee turnover.
In some cases, the same factors behind absenteeism are related to a high number of resignations. However, it is always worth investigating.
Companies that deal with high turnover have higher expenses with terminations, hiring and training.
Furthermore, they can get a bad image with employees and the market, harming their talent attraction .
Depending on the result indicated by the KPI, HR needs to understand the causes and study what to do, with regard to people management, to make the organization a place where everyone wants to work.
To close our list of examples, remembering that there are several other KPIs that can be very useful, let’s talk about productivity .
Considering time, quality and costs, this indicator shows how much money the company makes with the performance of each employee .
The idea is not just to find out if the worker can generate revenue for the organization, but to understand how efficient the processes are.
If the result is not as expected, the next step is to investigate the possible causes of the problem and define an action plan.
Low productivity may indicate the need for training, improvement of motivation, adaptation of the work environment, among other issues that compete with people management.
Best practices for dealing with the KPI in the company
It’s always interesting to know tips, or best practices, to successfully execute something, don’t you think? So we have some suggestions to share with you. Look!
Evaluate results periodically
After implementation, it is important to plan and conduct periodic assessments to understand the impact of each KPI .
After all, it makes perfect sense to want to know the advances made by the sector in which the key indicator was implemented and in the company as a whole.
Don’t forget to put these evaluations on the schedule to avoid them being just in the field of ideas, losing the timing and ending up not resulting in reliable data.
Keep teams up to date
As we mentioned, there are people involved in the application of KPIs and actions related to the objectives pursued.
Knowing this, never ignore the importance of keeping everyone well informed and updated about the process .
Teams need to know, among other things, even what should be done if the results show variables.
Have a contingency plan
Speaking of variables, it is prudent to have defined a contingency plan with clear guidelines to be followed in case the KPIs point to negative results .
For this, it is necessary to study the indicators to establish limits that indicate when a result is positive and when it is negative.
follow the trends
Sometimes the results analysis of a KPI can become myopic or biased . These are terms used to define situations where a broader view gives way to a focus on already very familiar data.
We are not suggesting that, at all times, you try to see something new from the indicators; one cannot forget the purpose of each of them.
However, when analyzing them, it is important to pay attention and be a little more open-minded to identify possible trends and extract increasingly useful information.
Keep the team motivated
We talked about this before, but we think it is necessary to reinforce the idea of stimulating the improvement of indicators with each employee.
The essence of the application of KPIs is linked to a search for continuous improvement . Thus, we are talking about something that, at best, becomes part of the organizational culture .
This also requires continuous stimulation work, so that the idea of improving indicators is incorporated into the employees’ routine.