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What are the KPI examples?

created on 20 May 25 Monday 07:48

supply chain kpis

KPI stands for Key Performance Indicator. KPI is a measurable value that reflects the effectiveness of your entire input resources and processes to produce or attain the desired output results (organization objective). This output results must be within the specified time frame stated on the strategic plan. KPI is then an overall indicator that communicates and indicates that desired or set objectives are within the time frame. Regularly, when the abbreviation KPI comes into focus you may think it is just a performance management tool used for performance appraisal. But (KPI) has a very important element you should note - ‘KEY’.

When someone talks about Key elements or Key event, it means that it is a crucial and most important core activity that has an impact on the subject matter (performance). When we pay attention to the word Key on the KPI we can understand better what KPI is. The existence of ‘key’ makes the whole tool a crucial and most important tool in performance management. KPI being a core performance element in an organization gives it a purpose to highlight and bring into focus performance. KPI clears the fog and directs you on the most important process in your business that has helped your team realize those successes.

KPI is also used to evaluate a process and the effectiveness of a team in the utilization of the resources or inputs to the organization's targets and objectives. Most of the time, we get lost on the way and think that KPI is a tool that drives or brings performance and by thinking so we misuse KPI hence losing its purpose.

A well structured and designed killer KPI can detect and point your business in the right direction through its several features like KPI Dashboard and KPI metrics. When you set objectives or when you set out on any quest you must have a strategy on how to do it. For such a mission to succeed you actually must stick and follow it like a manual.

KPI as an umbrella

It is true that KPI shapes your strategy and gives business direction in achieving the objective, it is important to your business success. For you to understand clearly what KPI is, allow me to describe it as an umbrella to what it detects or indicates performance management in the organization. Like a litmus paper or an electric tester that shows the flow of current in that wire KPI indicates the flow of your performance.

KPI as an umbrella has some different examples based on the organization's nature, size and structures. Before we look at the examples, I would like us to divide KPI into two levels to help us understand it exhaustively. In KPI I can say that we have a high - level KPI and the lower level KPI.

When I talk of High – level KPI am simply talking of the umbrella or the organization KPI that tracks the overall organization performance. Lower level KPI then is the departmental KPI like HR department, Marketing department and the many departments that exist in your organization. This lower level KPIs is what breaks to give the KPI examples.

What are the most effective KPI examples?

define kpi

KPI is a big and difficult business aspect to understand; you can easily mention or track one different thing instead of another. When you talk of examples, you can easily mistake them for KPI type and even KPI metrics. Let me work you out of this confusion that most of the businesses are stuck in and busy sailing on it in the wrong direction.

First, I would like to talk briefly about the KPIs types which are mostly used. Below are the highlighted KPI types;

  • Quantitative indicators
  • Qualitative indicators
  • Lead indicators
  •  Lag indicators

Quantitative indicators

These quantitative indicators are key performance indicators that are expressed in numerical values. They relate performance to those set goals and targets. They are easily interpreted and used in tabulation and graphs presentation to establish a relationship between performance variables. This KPI data are easily noticed since they are expressed in numbers like percentages, ratios, and other numeric figures.

Qualitative Indicators

Qualitative indicators are easily recognized by their mode of presentation. They are presented non-numerically and use a qualitative expression like taste, expertise, and image. Qualitative Indicators are associated with the quality of the process, products or the competitiveness of an employee in terms of the expertise they offer. Qualitative indicators are simply subjective to quality though hard to understand and need interpretation.

Lead Indicators

Lead indicators show or direct the business in the right direction. They give the business the purpose to work towards, a lead to follow. I can say lead indicators predict the final results or the outcome of a particular process.

In most case lead indicators provides the outcome of a process or business when you incorporate all the resource required while considering and adapting to all factor that affects the outcome. In simple terms, it describes the destination of every route (process) you will take.

A good example here is when your strategic objective is to maximize the production of a certain product. The lead indicator will be the percentages increase tied to certain resources, processes, and the number of employees equivalent to the increase in your production. Having those factors at constant will give you that percentage increase hence drawing a line on how to achieve them.

Lag Indicators

Lag indicators are associated with the success and failures of a business; they are indicators that show the key performance that leads to those successes and failures in business. These lag indicators show which processes, departments or business units tied to failure or success. 

Take for example the marketing department in your business; their main role is creating awareness of your products or business at large. When your business brand dropped on the ranking of the most known or used products in the market then the failure is attached to the marketing department. For the business to identify where the problem is, Lag indicators track and detect the problem.

Next are the various examples of KPIs that are mostly used in a business. These are not so different from the types; in fact, they are all specific break down of the above types. They are simply specified types of KPIs that are in action. These are the examples;

  • Dollar Value for New Contracts Signed Per Period
  • The number of New Contracts Signed per Period
  • Net Sales - Dollar or Percentage Growth
  • The number of Engaged Qualified Leads in Sales Funnel
  • Hours of Resources Spent on Sales Follow Up
  • Average Time for Conversion.

These are the few and most used KPIs examples you will find in a business. I should touch on the main and most important part of the business before I explain these KPIs. For a business to run smoothly I must say you need finance.

To get these finances you have to generate revenue, therefore I will strongly hold that financial KPIs are where your business will start. Have finances and it propels everything. I will base my examples on financial KPI although non- financial KPIs are also equally important. Today allow me to concentrate on the Financial KPI and briefly touch on the non- financial KPI.

What is Financial KPI

Financial KPI tracks revenue-generating processes and activities taking place in an organization. These financial KPIs are either directly or indirectly contributing to the organization's revenue generation. It does not necessarily mean they are from the financial department but, is an activity in the organization that is crucial in delivering financial goals and objectives. These KPI examples can be quantitative or qualitative indicators lead or lag indicators.

1. Dollar Value for New Contracts Signed Per Period

Dollar value against other currencies is a factor every business tracks every day; it is an important factor that every trader watches. Financial KPI must and should be designed to track the dollar value every time a contract is signed. It is very important to track and ensure that you consider the dollar value when doing everything in your business.

Any changes in the Dollar affect the whole contract value. It changes the term of the contract as far as the value is concerned right from the purchases and sale to processes and wages.

2. Number of the new contract signed per period

This KPI indicates the contract signed in a period be it monthly, quarterly or yearly. It tracks and evaluates the percentage of the contracts signed in a given time. Let's say you are a construction company, your target was to win 40 contracts a year and you have designed your KPI to track the contract signed in quarters (every 3 months) to help you evaluate the achievement of this target.

Your KPI will be indicating how many contracts in the percentage you have signed at the end of the 3 months, a quarter of a year. This ensures that the set target becomes clear and achievable and if not through such data collection. It is hard to understand that your target is beyond reach if these metrics are not tracked. It gives you a clear indication of your progress.

3. Net Sales - Dollar or Percentage Growth

Net sales are metrics in which the data collected are used to evaluate percentage growth in sales volume. Percentage growth KPI indicates how your sales are doing out there; it tells if your sale is increasing over time or decreasing. Such percentage growth information is the one every business use in the sales leads decision-making process.

Take for example a case whereby your target is to increase sales to a certain percentage like 50% in a half year. You invest in the sales team and researchers to ensure that there are enough awareness and a better understanding of your products on the market. Sales KPI tracks evaluate and establish the relationship or impact of the sales team and whether the research is done has accrued to a percentage increase or decrease.

4. Number of Engaged Qualified Leads in Sales Funnel

While this KPI is more of a marketing department it is not the only KPI. In every department, there are different KPI that tracks the different performance of that in a department. This means there is a department KPI that tracks the overall departments’ performance.

 As the name suggests it meant to collect data on the number of those leads that has an impact on sale. Remember in any sales process there are several activities done before the sales revenue is collected. This KPI, therefore, tracks this process, evaluate and establish a relationship between the sales and these leads throughout the sales channels.

5. Hours of Resources Spent on Sales Follow Up

The main idea behind every business success is its finances. Like I said before if you perfect everything and end up not selling your product, you are going to shut down your business. It is more important to have cash flow in every investment and the moment there is no cash flow you will quit your operation.

Designing a KPI for sales follow up is important because if you don’t have sales follow up you are probably going to input resources on leads that do not return. Return on investment is the basis by which business survives otherwise there won't be any progress.

6. Average Time for Conversion

Every business has a common factor in mind, ‘customer focus.’ There is no single day one will succeed if you are not customer-centered, you should have customers' wants and needs in your heart if you are to prevail.

Customer satisfaction is an equally important aspect of financial KPI especially in retaining customers. This should be done economically while ensuring high-quality products are supplied in the market. The average time for conversion in your production counts a lot in the cost of production. The average time for conversion KPI tracks how long you spent in the conversion. It evaluates the efficiency of your process, employee and their competence in delivering your services.

The non-financial KPIs in business are metrics that are not related to the revenue generation but contribute to the performance. Such KPIs are not directly linked to business finances. Like employee productivity or punctuality in the organization has a lot to do in the overall performance.

In most cases, you may think that the KPI examples list can be exhausted but that is not the case. Like I said before, your KPI is defined by the nature of your business, size, and structure. Let’s take for example an organization with business units and division, their KPI will be base on things like divisional KPIs.

How do KPI works?

what is kpis

I believe you must be wondering how KPI functions as an indicator. I know most of us can deduct that it indicates performance. This deduction we have made does not explain how this works. KPI is a tool and every tool has a function. The role of KPI is to indicate those key performances as we have talked about but the question is how?

First, allow me to introduce two KPI aspect I believe you are familiar with, KPI dashboard and KPI Metrics. Let me with defining and then differentiating them using their definitions. KPI dashboard like a car dashboard is an interface that communicates or indicates the feature you have set to track.

For example, your KPI is to track sales volume; therefore your dashboard will be indicating daily sales and maybe a percentage increase or decrease in the daily sales. While KPI metrics are the various collected data that will be subjected to evaluation and tabulation to establish whether there is a decrease or increase in sales for our case. From this, you can see the difference and what each means.

KPI uses this two-element KPI dashboard and KPI metrics to indicate. Let's have an example to help understand how it works. I will pick a car dashboard, something I believe we are all familiar with. In a car dashboard, there are several indicators like engine indicators indicating oil, temperature, power and more. We also have indicators on the fuel, speed, doors and safety belts. This is how the business KPI dashboard is; it shows several processes you set to track.

KPI metrics, on the other hand, are the specific data collected, in our example above a speedometer on the car dashboard; it accumulates the data on how fast you are driving. This speed Metrics are then evaluated to provide you with the distance you have driven and the overall average speed used throughout the journey. These are what is shown on the KPI dashboard and what KPI will record for the business decision making hence how KPI works.

How to implement a ‘killer’ KPI?

We have learned that KPI is an important tool in performance management and a key element in tracking your business progress. I know you now want to kick-start and get performance in action with what you have learned.

But first, try and understand how to implement it. There is no doubt that you want to implement or revive an already existing KPI to be effective. Let me give you simple guidance before we get down to implementing our KPI. I know everyone can design a killer KPI that all of us will adore and want. That is not an issue, all can still go wrong and find your KPI failing and misleading. It is the strategic objectives that should be clearly stated. Let’s start with the objective.

When designing or stating your business objectives you must have the following;

  1. S – specific objective
  2. M – measurable goals and objective
  3. A – attainable objective
  4. R – realistic objectives
  5. T – time bond objectives

These are the key self-explained requirement that will help you implement your KPI. Before you designed your KPI you must watch these five elements. Do not be surprised to find that your business is struggling on the same KPI yet your competitor is doing well with the same KPI. I will stress this, 'make sure your KPIs are aligned with your strategic objective'. 

Secondly, you have the objective and a killer KPI ready to rumble with your competitor in the market. It is not game over, that things will now unfold themselves and square their way in the right direction. There is still a lot of work to do. Every single individual in this world is unique in a way and so are the businesses. Consider the fact that, most of the successful businesses are the one that decides to be unique in their operation. Unique in the way they do their businesses. In KPI make sure you become unique in what you track and measure, let the strategy guide you if you want your KPI to be effective.

Thirdly, I would say review and re-evaluating your KPI. It is something not new to every business. I would not say we do review and evaluate KPI only, every process that has proved to be effective must be reviewed and reevaluated. Business is dynamic in an ever-evolving universe; therefore, for your KPI to effectively-remaining relevant to your objective, it needs constant reviewing and re-evaluation. Just imagine how life would have been if we were to use barter trade, exchange of good for goods? I believe with the evolution of trade from barter to currency and now e-commerce has taken reviews and evaluation that led to the upgrading.

Finally, I would talk of something all of us are aware of, updating. Updating is a common word in every human being's mouth; we usually talk about updating software, handsets, computers and even simple things like a shopping list. I mean, we normally use the word updating more often, which is not different when it comes to updating your KPI.

In summary, Business is about doing right the first time and onwards. If you become reluctant and think that you have been outstanding! Then you will pay the price by recording losses. For a business or an individual to improve there must be a base, this is where everything starts. It is easy to set standards or limits when you have previous or current standards that you will base your objectives on.

If your KPIs are now ineffective then you are in a better place to pick yourself up. I am not saying beginners are disadvantageous to using KPIs; the fact is that you can get it right the first time and onwards. Like I said earlier that business is about doing right the first time and again and again. This is the only simple way to implement a KPI and by doing so you learn more and more.