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Business Process

What is a good KPI?

Melanie Hardcastle
Updated on Jan 04, 2021

Sometimes it’s easy to tell bad from good. Good apples are crispy and juicy. Bad apples are soft and, well, gross. But identifying a good KPI can be a bit trickier. To be effective and deliver the information you need to measure campaign progress and monitor organizational growth, a good key performance indicator should tick four important boxes.

  1. KPIs Should Be Clear

A good KPI can be understood and utilized by anyone with access to it. Business metrics don’t work if there is any confusion as to what it’s measuring or what the data means. Part of that clarity relies on objectivity. The information tied to a KPI should always be free from bias or personal interpretation. For instance, if you’re logging customer satisfaction and retention as one of your business metrics, the data recorded should be a number not a sentence discussing why you think that number is what it is. 

  1. KPIs Should Be Actionable

There’s no point in collected data unless you can use the resulting information to either confirm the efficacy of something you’re currently doing or alter an action already in progress to make it better. Yes, a good KPI delivers clear, objective data, but that data should help you adjust and improve campaigns as needed. If you look at a KPI on your business dashboard and say, “Who cares?” It’s time to ditch that metric and refocus your resources elsewhere.

  1. KPIs Should Be Attainable

A good KPI should be chosen because you think it will help you achieve a goal, and that goal should be attainable. It’s futile (not to mention frustrating) to spend time measuring performance if you’re hoping to hit a target that’s just plain unrealistic. Take customer acquisition cost for example. The average CAC in the retail industry is $10. If you’re in retail and started tracking CAC in an effort to get it under the $5 mark, you’re wasting your resources. It’s not a good KPI for your because you’re using it to chase an unattainable goal.

  1. KPIs Should Be Flexible

Lastly, always pick key performance indicators that can be adjusted as needed. Most organizations are dynamic in nature, meaning they’re constantly changing. Choosing to track metrics that can shift along with your business means better ROI and less of a chance you’ll squander time and money monitoring data that will suddenly be rendered obsolete.  

Perhaps most importantly, a good KPI never lives alone. Business metrics are made to be tracked and analyzed in groups. One bit of data gives you one bit of insight; a collection of data starts to paint a picture that is really worth looking at. For a more in-depth look at KPIs, check out our guide to key business performance metrics and see some detailed examples of business metrics at work.