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Step By Step Guide to Implementing KPI

created on 20 May 25 Monday 02:31


A good business occasionally carries out self-analysis. This process aims at collecting information and measuring the progress of the enterprise. This assessment process requires you to pay attention to particular parameters, coined in the term, key performance indicators (KPI). Therefore, the plan is to install the KPI into your business model to make future assessments easier. This is why today we bring an executive summary of the simple steps to implementing KPI. However, we cannot jump to the implementation process without talking about how one can arrive at the right KPI.

How to Select the Right KPI for Your Business


Choosing appropriate key performance indicators allows you to make accurate observations about the state of your business. Several aspects are considered in the selection process as follows:  

1. KPI Must Be Business Relevant

KPIs are quantifiable and will point you directly to an estimated performance relating it to a particular goal. The quantifying related directly to the nature of your business. For example, if you have an FBA business, goals will include things such as estimated product sales, conversion rates, site traffic, and customer service and inquiries success. The plan is that the KPI points you directly to the goals, areas that require improvement, and those that need prioritization. 

2. Needs to be Metrics focused

Metrics offer a detailed perspective within a specific KPI. Choose a KPI that does not point you to lots of metrics. Remember that you cannot focus on everything but on a few aspects that affect the business. Always know that the lesser the metrics within a KPI, the more precise the conclusion you get. Stick to four to ten KPIs.

It may be challenging to arrive at a specific number of metrics within a KPI. Limit the parameters to the ones significant to your business. Sort them out first before you progress to a multi-metric KPI.

3. Base Your KPI On the Growth of Business

KPI for a starting business is not as similar to that of an established one. The metrics in these businesses differ hugely. For example, a startup will want to know the effectiveness of implementing its business model. An established company focuses on how efficient it retains its previous clients. Moreover, how much the company makes from old customers? Another important metric of an established yet growing business is the cost when acquiring its competitors or small businesses.

4. Differentiate KPI Whether Lagging or Leading

These indicators represent your past performance versus your present performance. Beware that leading indicators are not more important than lagging indicators. The idea is to make sure that you know the type of KPI you chose. Know that lagging indicators give you the result of results already attained also termed the output. Leading indicators demonstrate progress. You realize that both of these indicators point you to fundamental aspects of the business and tell you what needs fixing to move the business forward.

5. Consider Industry and Business Model

As mentioned in the first point, the KPI needs to be relevant to the business. Your thinking about KPI should be that they differ depending on the industry and model of your business. A Software company may focus on application downloads, subscriptions, and upgrades. A retail store will want to focus on purchases and customer service. 

Once you have chosen your KPIs, it is time to implement it. The implementation process for the KPI takes five steps.

Steps of Implementing KPI


1. Define an aspect of your business to measure

The first thing you should keep in mind concerning KPI is that it must align with your business. Every business has a goal or more that it wishes to attain. Such a goal represents an aspect of your business that requires measuring. Typically, there are four main most businesses pay more attention to the namely financial aspect, the development aspect, the customer aspect, and the enterprise aspect.

  • Financial Aspect - Financial comes first in any business management. For instance, any investor will want to know the financial state of the business and the potential of the company before investing in it. Defining the financial aspect in implementing KPI aims to track the financial progress against the business goals set. KPI implementing should point you directly at what the company may attain financially. A typical business will just track profits; however, profits just make for the outcome. A true KPI tells of the orders made by customers and the expenses. The thing is that when orders increase and costs reduce then, you get profits. This is a better approach to assessing your business financial with KPI.
  • Development Aspect - Any good business should be able to generate more profits for its development. Development is possible when the profits are adequate to reinvest in the enterprise. Focusing on development means that you track your growth alongside marketing efforts. KPI for development, therefore, focuses on an incline in the volume of purchases, volume of repeat customers, progress of market share, and the acquisition of new clients. Combining these KPIs allows you to find the relationship between the problems that affect your business model. Moreover, you begin to understand your position in the marketplace.
  • Customer Aspect - The customer is a significant player in the success of your business. The goal of your business measured by KPI begins with knowing how satisfied your customer is. When paying attention to this aspect, several metrics are put into consideration, namely average response to customer inquiries, percentage of successful resolves to client issues, volumes of client complaints, and volume of customer calls. A rise in these issues will point you directly to what to resolve to surpass set targets.
  • Enterprise Aspect - The enterprise aspect encapsulates the internal processes that mean the most to your business. Any successful business knows the things to improve within itself to have a positive rebound effect on its performance. You will hear a company working towards employee satisfaction, better product quality, and the improvement of staff through training. These are the goals against which your performance measures on a KPI

2. Define the goal against which to measure performance

Your goal is the benchmark against which KPI compares the performance of a business. Usually, people will rush for a KPI and forget that the aim is to measure performance. The goal set needs to be SMART. A SMART goal is specific, measurable, assignable, relevant, and time-bound to attain a SMART KPI.

  • A Specific Goal - The idea of making your goal specific is that it creates a sense of action. A normal goal for a business will be "to generate more sales." A better goal will take the form "to get 250 customers." The second option already tells you exactly what you need. What may follow are the efforts to attaining that number of sales. The question for you is, therefore, how do you create more specific goals? A more specific goal requires you to ask yourself questions such as what you wish to achieve, how you wish to achieve it when you wish to achieve it, who needs to be involved in achieving it, and why you need to achieve it.
  • A Measurable Goal - A goal needs to be quantifiable. The aim of this to tell you whether you indeed attained that goal. A measurable goal also tends to motivate you. An unquantified goal does not direct the employee to what needs attainment. Once the review is complete, employees can quickly know when they attained a particular goal. So, how do you make the goal measurable? A measurable goal offers you numerical data. For instance, if you an FBA, you may say that you want to get 50 customers. This number can motivate. You may choose to work on attaining the 50 customers by starting with an email marketing campaign. You may do a social media campaign or search engine optimization of your product page.
  • An Assignable Goal - A goal needs a champion to steer it to achievement. Your goal, therefore, needs to be something that you can delegate. The purpose of this is so that the goal gets the full attention of someone. The person should be able to make choices about the efforts of achieving the goal. The person is responsible for managing a taskforce, tracking progress, and reporting to you. For this reason, also share the mini-goals supporting the primary goal. The smaller goals carried out effectively always leads to achieving the primary goal. All the performance is then tracked on a dashboard showing each small goal and progress.
  • A Relevant Goal - The big picture is important any time you talk about a goal. Relevance makes up for the big picture. Relevance includes what exactly you wish to attain, followed by why you want to achieve that goal.
  • A Time-bound Goal - You need to be specific about when you wish to have achieved your goal. Every goal should be tied to a deadline. Deadlines allow you to give more priority to the intention to achieve it. Moreover, you get to do things early and make amends where possible for more presentable attainment.

3. Compare goal with actual performance

A goal helps in the development of a KPI. The KPI functions through the comparison of the goal to the achievement attained. In this stage, the goal acts as a benchmark against which performance is based. At the end of the comparisons, it becomes easy for you to identify the part of your business that requires improvement. Three things you may want to compare are the process, strategy, and performance.

  • Process - You may want to improve the internal activities of the enterprise. If you have a production business, your aim may be to increase the production of goods by 50 percent. The performance may be you increased the performance by 40 percent. 
  • Strategy - The idea is to check whether the business model works. It may start by analyzing your business model. Your goal may be to double efficiency. The attainment could be more or less. If it is less, then a solution to make the process more effective is found.
  • Performance - This will depend on the nature of your business. You may want to improve your marketing campaigns. The goal will be to increase email conversions by 200%. The outcome may include "email conversions increased by 210%.” If lesser, you may need to improve your campaign, starting with the open rates until there is an upward performance. 

4. Review Up-to-Date Changes in Performance

Your business needs to move in the positive direction always. A review of what happens to your business presently can help with that. The question is, how do you review your everyday changes in performance?

  • Review operations - Before you can talk about your profitability, it is always important to talk about your product or service. The question is in what makes the services more successful. If they are not successful, then the focus needs to shift to key improvement areas. Metrics important in assessing your main activities include whether goods and services match customer needs. It could be about the product or services succeeding the most. Also, the problems affecting the performance of the product.
  • Assess business efficiency - As a business grows, there is a need to balance efforts to make the business operate normally, and those aimed at making the business grow. Your business is more efficient when it possesses a clear strategy. Assessing business efficiency could mean paying attention to the facilities of the business. Moreover, the business premises, information technology, professional skills as well as people and their skills. Premises encompasses the location of the business, the property of the company, and costs engaged with the business. Information technology encapsulates the information systems put in place to support business processes. Professional skills refer to the expertise and experience of the staff of your organization. All these work together in making it easy to achieve the main objective of the company.
  • Review Finances - After reviewing the operations and the efficiency of the enterprise, the finances require assessment. Failures in business owe the failure to poor planning and the incorrect management of financial resources. Management of the business and its finances, therefore, take the lead in any enterprise. Finances will mean a consideration of the cash flow, which is the inflow and outflow of money in the business. In flow could be an investment or money from customers. An outflow could be money spent on company expenses such as technology and stationery. Other financial changes could be in borrowing, the operational capital, and the growth of the company.
  • Review of competitor - As your business grows, it will be impossible to resist the fact that there are competitors in your industry. You need to know most, if not all, things about your competitor. Knowing allows you to capitalize on the shortcomings of your competitors and outshine them in the market. Your competition is also an indicator of your performance. The competitor may rank on top of you or just below you. Analyzing the competitor encapsulates knowing your competitor, and their products and services. Moreover, their pricing, their number of customers, their competitive edges, and disadvantages. The approach to competitor analysis includes an analysis of what the business feels about itself and what other people say about the company. Ultimately, you may consider a market analysis.
  • Market and customer analysis - Any good business starts with identifying a gap in the market. The gap in the market hugely dictates what makes the marketing plan to reach more people in that market. When the business is up and running, focus then shifts to the customer. In this review, you will pay attention to market changes, evolving needs of the customer, and external issues like technology and the economy. Moreover, this review involves an analysis of changes in competition in the market. This review of changes in performance allows the business to formulated better goals—furthermore, better KPIs, and improved future business performance.

5. Define an Interval Between Each Review

A review of your business, processes, customers, among other performance aspects, needs to be carried out occasionally. The question is, how often should the review be done? Moreover, what should be the interval for reviews?

The best recommendation for a review is an annual review. However, this may not be enough if your business is small. The small nature of your business could mean that there is a lot that is yet to be solved. The reviews can, therefore, be a significant number that waiting for a year may overwhelm the improvement processes.

For instance, if the company plans to improve its internal process, the goal may be to improve employee retention to 75%. The review of this KPI may be done semi-annually, quarterly, and ultimately as the business grows, annually on a Google Sheet .

  • A semi-annual review - It happens twice every year. Typically, the reviews are slated for early January and the first day of July. In the case of employee satisfaction assessment, your company may need to combine a review to a key improvement area. For example, a company may need to be quick in issuing compensations before employees ask for them. The company also needs to be the one to introduce compensation before a recommendation by an employee. A more intentional reward process would improve retention such that in the next review, the performance goes up.
  • A quarterly review - Happens four times each year. The idea of this review is to slate it in every fiscal quarter. The focus of this review is on the short term goals of the company, mostly any goal dated for achievement in less than three months. If your business is just starting, a quarterly review may suffice, given that it allows you to improve processes in limited time.
  • Annual Review - This review happens once every year. Its nature makes it more unique and a more revered review process. People do not usually for a year to come to an end. Occasionally a review of progress is done and delivered to top management. An annual review makes it easy to assess any aspect within an enterprise, given that a larger company may need more time to evaluate more massive sets of data.

A review may require considering several aspects to decide how often to do it. The considerations include:

a) The organization’s growth rate

An organization growing at a fast pace may end up with a lot of data produced. This means that there is a need to review the data before it overwhelms you and other reviewers. Therefore, the company may need to split the review time in bits that make the maximum use of data available.

b) The manager to employee ratio

When the number of employees to be analyzed is minimal, then the review process can be frequent. This is possible because the managers available are each handling a handful of employees, making the review easier.

c) Organization’s culture

The question here will be how the organization is used to carrying out reviews. It may be, the organization likes doing oral reviews. It may be how frequent the reviews are usually done. Moreover, it could be who usually handles the review process.

d) Consider Review’s relation to the reward process

The question here is whether reviews done have any relation to the compensation of an employee. Separate the reviews for reward from those for employee development.

e) Consider staff in review

A new member of staff will not be reviewed with others. You may need to allow for some time for the employee to settle it so that they have a good understanding of the organization in review. Moreover, the employee will give a conclusive response of whether they are job satisfied.


Implementing KPIs is an important process in the evaluation of a company’s performance. This is only possible when the choice of the KPIs was wise. The wrong KPI reflects inappropriate results on the KPI dashboard . Pay attention to the consideration made when arriving at the right KPI. Remember that the goals of the company the Key Performance Indicators of your enterprise.