Key Business Performance Metrics
How do business metrics produce more effective day-to-day operations efficiency? The solution is aggregating the right data and using it to create and enhance company processes.
Key business metrics for performance provide direction for future strategic growth.
The success of your company relies on the consistent reporting and evaluation of these business metrics. The obvious and most important business metrics for operations managers include total revenue, net profit, profit margin and loss. But these are only a few financial metrics that savvy business owners should keep an eye on.
Regardless of your company’s size or specific goals, there are a series of key business performance metrics you should consider adding to your data arsenal.
They fall into the following three categories:
- Marketing Outcomes
- Employee Performance
Let’s take a look!
Financial Business Metrics
There are endless key business metrics you can apply to the financial piece of your business. We recommend focusing on these key financial metrics as a jumping off point:
Gross Profit Margin, Net Profit, Net Profit Margin, Debt Asset Ratio, Total Revenue, and Time Periods.
1. Gross Profit Margin
Your gross profit margin provides a wealth of financial metric insight. It is a profitability ratio showing you how much of every dollar is left once you pay the cost of goods sold.
Determine your Gross Profit Margin using this equation:
Gross Profit Margin =
(Revenue – Cost of Goods Sold)/Revenue
When compared around your industry, your gross profit margin can uncover if your company is pricing your goods and services competitively.
Your gross profit margin should be large enough to cover operating expenses.
Everything else is profit.
2. Net Profit
All profit is not created equally! Keeping a tight grasp on your company’s Net Profit ensures you know the true bottom line net earnings.
Determine your Net Profit using this equation:
Net Profit =
Total Revenue – Total Expenses
Net profit is found on the last line of the income statement, which is why it’s often referred to as the bottom line.
Stock prices revolve completely around this figure.
When Net Profit is low, it indicates much more than weak stock prices. Further data collection in all areas of business is necessary to determine the weak link(s) that contribute to the issue.
3. Net Profit Margin
According to InvestingAnswers.com, “Net profit margin is the percentage of revenue remaining after all operating expenses, interest, taxes and preferred stock dividends (but not common stock dividends) have been deducted from a company’s total revenue.”
Determine your Net Profit Margin using this equation:
Net Profit Margin =
Net Profit/Total Revenue
Understand the percentage of total revenue made it all the way to the bottom line by dividing net profit by total revenue. This key business metric is of utmost importance to owners, investors and shareholders.
The key here is turning sales into profits.
It is quite literally a percentage of sales and makes it easy to compare across the industry.
4. Debt Asset Ratio
If you have any debt on the business, the debt to asset ratio metric is important. It tells you the percentage of total assets that were financed and are now creating debt.
Determine your Debt Asset Ratio using this equation:
Debt Asset Ratio =
Total Liabilities/Total Assets
The goal is to have as low a percentage as possible, indicating the the bulk of the company’s assets are owned by the shareholders and not the creditors.
Businesses operating effectively have debt payoff plans that dwindle the debt over time. Keeping a close eye on this metric helps ensure your payoff process is effective.
Now that you have the businesses financial metrics under your belt, let’s look at a how to best measure marketing efforts.
Marketing Business Performance Metrics
With hundreds of business metrics applicable in this piece of the puzzle, we will focus on the fundamental business performance metrics every business should know to measuring operational efficiency.
The metrics will vary depending on the kind of marketing your company does, so modify this list to fit your needs:
Return on Advertising Spend, Customer Acquisition Cost, Time to Payback, and Marketing Originated Customer Percentage.
5. Return on Advertising Spend (ROAS)
ROAS is often considered the most useful metric to evaluate the business performance of marketing campaigns. It looks at every ad dollar spent, and determines the revenue earned.
The goal is having a deep understanding of profitable and unprofitable ad spends. ROAS is applied to specific campaigns and ad groups to shed light on business performance.
Determine ROAS using this equation:
Ad Revenue/Cost of Ad Source
For example, if your company spent $3,000 on Google Adwords and earned $6,000 revenue directly from that campaign, the ROAS is $2.
6. Customer Acquisition Cost (CAC)
Often overlooked but so very important is the CAC metric. This is your total Sales and Marketing cost and it will shine a bright light on your marketing efficacy in its entirety.
Determine CAC using this equation:
(Ad Spend + Marketing salaries + commissions + bonuses + overhead)/New Customers
You will want to do this within a specific time period. For example, if you spend $100,000 on Sales and Marketing in 2016 and earned 200 customers, the CAC is $500 per customer.
7. Time to Payback
Although it has no fancy acronym, time to payback is especially relevant if your sales funnel is very long.
Note that there are industries where customers pay one time upfront and therefore this business metric can be skipped.
For companies with monthly or annual payment structures, this is the number of months it takes you to earn back the CAC you spent to get a new customer.
So utilizing the example above, your new customer cost you $500.
How many months do they need to remain a customer before you earned back your $5,000? The industry goal is to keep Payback Time to under 12 months. In other words, becoming profitable within one year of customer acquisition ensures you begin making money quickly.
Determine Time to Payback using this equation:
Time to Payback =
CAC/Monthly Fees Paid -OR- CAC/Annual Fee
For example, your customer would need to pay ~$42/mo in order for you to become profitable after 12 months if your CAC is $500.
8. Marketing Originated Customer Percentage
The point of this business metric is to determine exactly what percentage of new customers were earned from marketing efforts.
It is different from CAC because it is looking at the total number of customers earned compared to the number of customers earned specifically through marketing.
There are a number of ways your company acquires customers without marketing, like referrals or walk-ins for example.
You will need a business process in place to label all customers either marketing originated, or non-marketing originated.
Determine Marketing Originated Customer % using this equation:
Marketing Originated Customer Percentage =
(Total New Customers – Non-Marketing Originated)/Total New Customers
For example, if you earned 200 new customers, and 65 of them were non-marketing originated, you would divide 135/200 and have a 67.5% of marketing originated customers.
This number can then be compared to other marketing and financial metrics. Having the customer percentage helps determine the need for an increase or decrease in the marketing budget.
As mentioned, there are a slew of marketing metrics you can sink your teeth into on any given day. But when it comes to key business performance metrics, the four measurements above top our list.
Employee Business Performance Metrics
Aside from the ambitious solopreneur, every company of every size must include employee performance metrics if they want to use metrics to boost operations and understand revenues per employee.
The success of a company often hinges on the consistent evaluation of employee performance, as the other key business metrics (financial, marketing) rely on employee effort.
Accurately evaluating your employees is based on a series of key business performance metrics:
Employee Efficiency, Quality of Work, Adherence to Values, Customer Satisfaction, Revenues Per Employee, and Measuring Operational Efficiency.
9. Employee Efficiency
Determining employee efficiency metrics means setting realistic, measurable goals.
Consider the following ways an employee can prove their efficiency:
- Maximizes productivity
- Minimizes cost
- Makes few mistakes
- Meets deadlines
There is no boiler plate equation for measuring this.
In short, it quantifies how much work is being accomplished. Compare efficiency to the cost of employment, and against other like-employees.
The best way to create in-depth evaluation is to have the employee prepare their goals in ways that can be measured in the future. This includes adding details like numbers and dates whenever possible.
Performance reviews or team assessments can be used to determine if these goals are met.
You can further measure employee efficiency metrics by gaining insight from managers, members from other teams that work closely with the person, and so on.
10. Quality of Work
You may be wondering why we only included quality and not quantity.
Quantity is inherently measured in the efficiency metric. Quantity without quality works against your business. Quality is in it’s own segment.
The actual work being produced is reviewed in order to determine true quality. Because this is subjective in most cases, creating a measurement process is crucial.
For example, an employee in a sales service position like insurance proves they do quality work by retaining clients and their customer satisfaction.
For less specific roles, consider implementing a quality score that both the employee and their direct manager completes on a task-by-task basis to ensure operations efficiency.
Additionally, measuring work that is of sub-par quality can help provide an overview of the employee’s efforts. Here are some things you can quantify:
- Error rates
- Customer satisfaction levels
- The amount of work that must be redone
- Revenues per employee
Individual performance is difficult to measure manually and talent management software has helped lift this burden.
11. Adherence to Values
Measuring how closely an employee follows the company’s values is a relevant metric in performance management.
Company values are put in place to create a culture and guide behavior. These values serve to shape abilities to make decisions and set goals.
These values intend to influence each and every employee in their daily efforts. Adhering to the values and embracing them as part of their corporate culture is key to growth and sustainability for business performance.
Like many employee related metrics, measuring adherence to company values will also be subjective.
The key is to ensure your company has clear, concisely defined core values. They must be easily understood and regularly shared.
Consider the following ways you can measure this:
- Include the core values on employee performance reviews and asking the employee to rate their adherence.
- Develop an employee of the month (or week) system that ranks based on adherence instead of solely performance.
- Ask managers to notify upper management or human resources if an employee is deviating from the values.
It’s a fact: analyzing business performance metrics can ensure better operations. As an owner or executive, your goal is to maximize profit.
Having the right financial metrics and business performance metrics in place provides you with a consistent flow of data you can use to measuring operational efficiency to streamline effort and increase success.
While the process of developing these metrics can be a bit challenging, the positive outcome is worth it.
Consider these examples of business performance metrics to maximize operations:
- Gross Profit Margin
- Net Profit
- Net Profit Margin
- Debt/Asset Ratio
- Total Revenue
- Variable Costs
- Sales Revenue
- Cost of Goods Sold
- Total Sales
- Return on Advertising Spend
- Customer Acquisition Cost
- Time to Payback
- Marketing Originated Customer Percentage
- Time Period
- Employee Efficiency
- Quality of Work
- Adherence to Values
- Total Sales
- Customer Satisfaction
- Revenues per Employees
- Operations Efficiency
Use our outline to create the custom reporting structure for your business. With consistency and execution, you will see your business thrive.
Can you think of any other key business performance metrics to measure for success?
What are examples of metrics?
Business metrics help paint a picture of a company’s performance. While a single number may serve as an indicator of a brand’s health, analyzing several metrics is a better way to measure trends including long-term growth and whether a certain promotional tactic or advertising strategy is working or not.
Some examples of metrics include:
- Net profit margin
- Gross margin
- Year-to-date sales growth
- Customer acquisition cost
- Qualified leads per month
- Customer engagement
- Conversion rates
- Marketing qualified leads
- Sales qualified leads
- Marketing spend per customer
- Return on investment (ROI)
- Lifetime value of a customer
- Customer retention
What is KPI in business?
KPI stands for Key Performance Indicators. These metrics are used to measure the efficacy of a marketing strategy, promotion, sales drive, or other goal-based initiative. There are high-level KPIs, which focus on broader performance questions, and low-level KPIs that zero in on specific departmental process such as sales numbers or employee retention.
In order to work, KIPs must be quantifiable, reliable, shared, objective, trackable, and balanced (you have to look at each factor from several angles for the most accurate understanding). Used correctly, KPIs can help focus attention on shared goals while providing information vital to the decision-making process.
What is another word for metrics?
Metrics are also called KPIs, or you may see them referred to as benchmarks, milestones, grades, bars, or parameters. In some situations, you may see metrics identified by name, such as “churn rate” or “productivity ratio.”
What are key business metrics?
- Key business metrics are measurable data points that are integral to understanding a company’s current level of success, identifying weaknesses and strengths, and finding ways to fuel progress.Though specific metrics may change somewhat depending on the industry and certain goals — for instance, financial metrics include liquidity ratio and contribution margins — these 10 are used frequently:
- Total revenue
- Cost of customer acquisition
- Customer retention
- Operating productivity
- Gross margin
- Monthly profit/loss
- Overhead/fixed costs
- Variable costs
- Cost of goods sold
How do I get business metrics?
Business metrics, or KPIs as they’re often called, are typically tracked using an analytics program or other similar platform. Customers can sign into their accounts and take a look at their business dashboard to see where those metrics stand. Keeping an eye on that data is the best way to track company development and see where you are in relation to reaching your goals.
You can also partner with a marketing agency or other similar firm who specializes in planning campaigns and tracking metrics. They’re likely to already have software in place to help track KPIs and the knowledge to interpret the results.
What are the 5 key performance indicators?
There are many different types of key performance indicators; the ones you choose will depend on your industry and your goals. For instance, if you’re a gym owner testing out new group classes, you might want to measure Average Class Attendance and New Customer Acquisition to understand how many people are signing up during your promo and how popular the new classes are. Those KPIs wouldn’t be relevant to a financial firm or gift basket company.
In digital marketing, the top 5 key performance indicators might be:
- Web traffic
- Cost per leads
- Bounce rate
- Conversion rates
- Customer lifetime value
What are KPI examples?
There are hundreds of KPI examples depending on the type of business you have and what your goals are. Since the type of key performance indicators you need are dependent on your objectives, you first need to identify where you want to go, and only then can you select the KPIs that can help you get there.
Some KPI examples include:
- Total sales by month
- New customers
- Number of qualified leads
- Conversion rate
- Customer turnover rate
- Customer engagement level
- Web traffic by source
- Daily service usage
- Net profit margin
- Vendor expenses
- Net promoter score
- Retention rate
- Traffic from organic search
- Visits per channel
How is the term metrics best defined?
The term “metric” is defined as a data point that measures the progress (or lack thereof) of a specific business process. Like all metrics, marketing metrics must be quantifiable, shareable, understandable, and relevant to the goal. Every industry has their own metrics and may also use universal metrics related to revenue or customer value.
What is another word for analytic?
In marketing, analytics, metrics, and KPIs go hand in hand. In fact, those terms are often used interchangeably to refer to data points, figures, and values used to measure everything from email clicks to sales per channel. By understanding analytics, marketing professionals and business owners interested in playing a hands-on role in managing campaign and/or operational performance can increase efficiency and optimize ROI.
What are metrics and facts?
Metrics are data points used to quantify the status or success of a specific process. Metric comes from the Latin word metiri which literally means “measurable”, and these numbers are often relative in that they are presented as ratios or are evaluated in tandem with other numbers. Facts, on the other hand, are static bits of data that can stand alone. Facts are used to inform metrics. For example, knowing you have 100 new SMS sign-ups this month is a fact. Knowing how that relates to SMS sign-ups last month and where those new subscribers are coming from is a metric.
What are the 5 most important metrics for performance of the product?
If you’re launching a new product or revamping an existing one, it’s vital that you understand everything about that product’s success as it happens. By tracking progress in real-time, you can adjust your campaign and maximize reach, conversion, and ROI. To do so, use these five important metrics:
- Conversion Rate: How many consumers who look at or otherwise consider the product actually go on to make a purchase? Low conversion rates could indicate a pricing issue or lackluster copy. High conversion rates indicate your messaging is on target.
- New Customers: Is the product attracting new customers? While any product purchase is considered a positive, knowing how many new customers there are vs. repeat customers could help predict growth.
- Active Users: How many people are actually using the product? This metric is typically time-restricted; you might measure daily users or look at an entire week or month.
- Net Promoter Score (NPS): How likely are customers to recommend the product to other people? Surveys can be especially useful here.
- Feature Usage: How often are consumers using specific features? This is a very useful tool when the product is digital or service based. Understanding product usage can help shape future product versions and save money by eliminating underutilized features and reallocating associated resources.
What is the difference between metrics and Matrix?
In marketing, metrics are quantifiable data points used to track certain business processes and/or evaluate the success of a campaign or promotion. A matrix is a way to plot those data points so it’s easier to see how they relate to one another. For example, you may measure the number of brand mentions you get on Instagram each week (those are your metrics), and then put all of those stats on a graph (your matrix) to help pinpoint trends.
What are project management metrics?
Project management metrics are an essential part of overseeing a success project. Metrics and key performance indicators (KPIs) measure the efficacy of certain strategies and also help product managers make more informed decisions. Metrics can prove value, improve productivity, identify shortcomings in relation to competitors, and help keep a product on budget.
Important product management metrics include:
- Productivity: How are resources being used? Are there ways to encourage staff performance or streamline the workflow? Can you remove friction to make it easier for team members to do their jobs?
- Scope of Work: What tasks does the project entail? This list may change from the pre-project planning stage depending on other changes like moving deadlines or budgetary shifts.
- Quality Assurance: Products should be tested at every stage to ensure customer satisfaction and prevent defects from going to market. Remember, “product” can be something tangible, like a shoe, or something less tangible like a web-based app.
- Cost: Everything has a price tag. As other project management metrics show up, costs could skyrocket or there could be a budgetary surplus. Knowing this as it happens allows for adjustments, so the rest of the project stays on track.
- Gross Margin: Gross margin refers to the money remaining after you subtract the cost of goods sold from the net sales revenue. Since most projects are aiming for profitability, knowing whether you’re coming out ahead is crucial.
How is operational efficiency measured?
“Operational efficiency” is a metric that measures whether the profitability of a project or company justifies the outlay of resources used to reach that profit. An efficient operation is likely profitable thanks to productive employees and well-organized systems. An inefficient operation is a sign that there needs to be improvements in order to ensure a positive customer experience, deliver value, and achieve (or increase) profitability.
To measure operational efficiency, look at these metrics:
- Manufacturing/Production Efficiency: How long does it take to produce a product or service?
- Revenue Per Employee: Are your employees paying for themselves or are you overstaffed for the tasks at hand and losing capital as a result?
- Overhead: In addition to employee costs, what are your other fixed and variable expenses? Can you find ways to scale back on utilities or cut costs by outsourcing administrative tasks?
- Marketing: Is your marketing campaign delivering? Evaluate things like your Google ranking and organic traffic to see if your strategies are paying off (literally) or if it’s time to redistribute your budget to make each dollar stretch a little further.
What are operational performance metrics?
Operational performance metrics are a type of key performance indicator (KPI) that gives you insight into what’s going on in your business. Rather than guessing whether you’re profitable, you should know without a shadow of a doubt how much money you’re bringing in, how much money is going out, and where that leaves you financially. That’s just one example of operational performance metrics at work. Here are some others:
- Overtime hours
- Cost per acquisition
- Delivery time
- Lead to sales conversion ratio
- Cost per click (marketing)
What is meant by operational efficiency?
Operational efficiency refers to how a business’s output relates to its input. In other words, does the revenue, and more specifically the profit, justify the expenditures? It’s beneficial for companies to be efficient, as that means they’re being productive and using their resources wisely. Note that efficiency isn’t the same as success. Inefficient companies may reach their objectives, but they could be sacrificing profits or losing other resources along the way.
Achieving operational efficiency requires evaluating all of your processes and seeing how you can improve on each aspect until you’re sure every action is happening in the best possible way.
How is efficiency calculated in operations management?
To understand how to calculate efficiency in operations management, you must first understand the difference between efficiency and productivity. Productivity focuses on the overall output achieved by an employee or team. Efficiency also considers the resources used to achieve that output. Therefore:
Efficiency = (Work Output/Work Input) x 100>#/p###
“Work” in this equation refers to all the resources used in production, such as labor, time, paper, pencils, etc.
How do we calculate efficiency?
To calculate efficiency, we use this formula:
Efficiency = (Work Output/Work Input) x 100>#/p###
Multiplying (Work Output/Work Input) by 100% gives you a percentage that quantifies in no uncertain terms how efficient a business or project truly is. This is an invaluable asset as it allows you to understand how you’re allocating resources and quantify any changes in efficiency as you strive to make improvements.
In a perfect world, your efficiency would be 100%, but in reality that’s a very difficult number to achieve. Lapses in customer service, shopping delays, cumbersome software, poor interdepartmental communication, and lack of transparency are all things that can negatively influence efficiency. Many of those factors can be addressed with operational changes and training, but others (such as weather issues preventing deliveries) are out of your control.
What are operational indicators?
Operational indicators are essentially the same as key performance indicators with an added focus on real-time analytics. These indicators represent quantifiable data gathered using predetermined parameters such as what’s being measured, who or what is measuring it, when/how often it’s being measured, and when that data will be evaluated.
Businesses use operational KPIs to see what’s happening with their operation at that very moment and how current numbers stack up against KPIs that reflect other time periods. For instance, whether today’s cost-per-click numbers are better than yesterday’s and what changes need to be made to make tomorrow’s numbers even better.
Operational KPIs differ from strategic KPIs in that operational KPIs may be monitored by the day or even the hour. Strategic KPIs are more about monitoring trends.
What is efficiency with example?
To understand operational efficiency, you need to know how a business’s output relates to its input. To be efficient, organizations must be able to deliver quality, satisfactory products while still being cost effective in both production and execution. This requires using technology and other resources to minimize waste and maximize profit margins. Efficient businesses are often the most competitive, as they’re able to deliver comparable or better products than their competitors while also achieving an economic advantage.
One example of efficiency would be a company that replaces manual assembly with machinery that makes more products per hour while also greatly reducing or even eliminating human error that could affect quality or slow down production.
Another example of efficiency, this time in marketing, would be using chat bots to add value to the customer experience without requiring extra manpower.
Is operational efficiency a strategy?
Not really. Operational efficiency is more of a tactic, in that gathering information about operational efficiency is way to understand the status of certain business processes and projects and decide how to progress from there. This all happens in real time; as you get data about operational efficiency, you’re also acting on it. It’s a way to achieve goals rather than a way to plan out those goals.
Strategic planning is the precursor to operational efficiency. The strategy you (or your marketing team) creates as a path toward your primary objective is what will shape everything from budgeting to messaging to which channels you’ll use to get that message out. Operational efficiency measures whether the actions you’re taking as part of that plan are serving your business or whether there are changes that need to be made to protect your bottom line and give you the best competitive advantage.
How do you calculate work efficiency?
Work efficiency refers to how long it takes an employee to complete a designated task versus how long it should theoretically take the employee to complete that task. The formula for work efficiency is the same formula used to measure efficiency in general:
Efficiency = (Output/Input) x 100
Multiplying the result by 100, as illustrated above, delivers work efficiency as a percentage. That’s helpful both to understand how an employee is performing and to compare that number to other employees. Work efficiency doesn’t have to pertain to employees, though. This efficiency formula can be used to evaluate other processes or projects too, such as seeing whether a marketing strategy is efficient or calculating the efficiency of a pay-per-click campaign.
How is BPO efficiency calculated?
Business process outsourcing, or BPO, is the practice of contracting out work to a third-party company. This can be a great move for businesses that need help with administrative tasks, marketing, production, and other specialty jobs, but understanding whether these outside vendors are efficient is important as that efficiency affects your ability to deliver exceptional customer experiences.
To calculate BPO efficiency, many people look at the rate of productivity:
Occupancy Rate + Available Rate = 100% (per given time period)
In this case, “occupancy rate” is defined as whether the contractor is actually working versus the “available rate” which means they’re available to work. In a call center environment, if there are 100 employees available to take calls but only 30 actually on calls, there’s a 30% productivity rate. That indicates waste, as you have 70 employees on the clock that aren’t currently delivering value. That’s inefficient.
For a true understanding of efficiency though, you have to look beyond productivity to consider things like service level. If you drop the number of agents from 100 to 30, since only 30 were actively taking a call in the example above, what happens if you suddenly have 35 callers? Are the 5 customers who get frustrated waiting for assistance worth the savings? Understanding efficiency as the sum of several linked metrics is crucial to making informed and constructive decisions.
What are the two basic measures of operational efficiency of a company?
The two basic measures of the operational efficiency of a company are:
- Inventory Turnover Ratio: Inventory that just sits in your warehouse or on store shelves is trapped money. You’ve made the investment, but it’s not paying off. You may even be losing money because of the overhead required (rent, labor, utilities, etc.) to store and monitor that inventory. Your inventory turnover ratio represents how frequently you have to replenish your stock. You can find that number by dividing your cost of goods sold by your average inventory balance, or you can express the ratio in terms of how many days a product sits before being sold.
- Working Capital Turnover Ratio: Businesses use their working capital turnover ratio to determine how efficiently they’re using working capital to generate sales. The higher the ratio the greater the efficiency, but only to an extent; if the ratio is too high, it could indicate that the business is growing faster than existing capital can support. To calculate your working capital turnover ratio, you need to divide your net sales by your working capital (where working capital is current assets minus current liabilities).
What is KPI in HR?
Human resources (HR) uses key performance indicators (KPIs) to measure departmental performance as well as seeing how the department is contributing to the overall health and success of the business. Though there are theoretically hundreds of HR metrics you can track and analyze, most won’t have anything to do with your underlying strategy or goals. For instance, it may be interesting to know what the company’s average salary is, but it’s unlikely that number has any bearing on how efficient the HR team is.
If you’re looking for data to help support HR strategies such as promotion employee satisfaction and reducing churn, these HR KPIs are likely to be useful:
- Employee absence rate
- Cost of employee absence
- Employee productivity
- Employee satisfaction
- Employee engagement
- Internal promotion rate
- Net promoter score
- Workforce cost percentage
- Quality of hire
- Turnover rate
- Involuntary turnover
What is KPI Matrix?
“KPI matrix” is a common search error when people are actually looking for “KPI metrics.” Key performance indicators (KPIs) are important metrics that help measure the effectiveness of a campaign and/or how well a company is doing in achieving its goals. KPI metrics must be measurable, meaning they’re often numbers or percentages that are calculated not just once but many times. Those numbers are then looked at as groups. You can see whether your number of qualified leads is trending upward or downward or see if your net profit margin is on the rise.
Just to erase any confusion, technically speaking KPIs and metrics are not the same thing. KPIs are measurable values that demonstrate efficacy by evaluating targets, timeframes, and outcomes, while metrics track the status of a specific process and may not be based on any of those same factors.
What is a good KPI?
A good KPI provides objective data that can be used to evaluate progress, adjust strategies, and achieve goals. They should also be:
- Clear. KPIs should be universally understood with zero confusion about what’s being measured.
- Actionable. Whatever data you’re getting back thanks to the KPI should be useful for adjusting and improving your campaign or other initiative.
- Attainable. There’s no point measuring performance if you’re hoping for a result that isn’t realistic.
- Flexible. Choose KPIs that can be adjusted as needed. For instance, if you’re investing in software that measures order fulfillment time, be sure you can tweak the algorithm if operational changes require it.
A good metric can’t live in a vacuum. Instead, it should work with other metrics to create a broader understanding of the current health of a campaign or business process.