Understanding Key Performance Indicators (KPIs)

1. What are KPIs?

2. Why are KPIs Important?

3. How to Use KPIs?

What are KPIs?

Every organization sets objectives to achieve its goals. Setting objectives at the individual and team level is important as it builds a foundation for organizational success by measuring progress. To measure progress at successive stages, it's essential to have a measurable value that shows how effectively an organization is achieving its key business objectives.

Key Performance Indicators (KPIs) are measurable values used to evaluate how successful an individual or organization is in reaching a specific target.

Why are KPIs Important?

KPIs are essentially used by any team or organization, regardless of size, stage, or industry, to track development on multiple tasks and to make sure continued success.

KPIs help you and your organization to track progress toward goals in your organization and gauge an organization's overall long-term performance. Also, KPIs can drive good growth in an organization at individual and team levels.
KPIs provide targets for individuals and teams to strive towards milestones to monitor progress and insights that help people in the organization make better decisions. You can use KPIs to assess the success of a particular activity or an ongoing process in your organization.

Note: Do not have too many KPIs for your goals. Make sure that you have adequate KPIs to measure your team or organization's performance against your key objectives.

How to Use KPIs?

If you have set clear and concise objectives, as an individual, department, or organization. Then you should use the KPIs to measure your performance with respect to your goals.

The most suitable time to use KPIs is when you have set up clearly defined goals and strategies and are now ready to measure your performance to achieve those goals.

  • You can use KPIs as decision-making tools to empower yourself, your team, or your organization with better-informed decisions concerning strategic goals. Align these goals to the organization's success factors and its vision and strategy.
  • You can use KPIs as meaningful indicators to reduce uncertainty, avoid common mistakes, gather useful information, and gain more clarity about how well your goals can be achieved. Provide context for each KPI by connecting it to an objective and comparing it to a target.
  • You can use KPIs as motivational tools to motivate employees to reach the targets in achieving the goals and strengthen shared values and common goals in your organization.
  • You can use KPIs as a consistent unit of measurement to track progress toward your goal and allow comparisons over periods of time to improve performance.

KPIs demonstrate whether the goals that you have set will be met or not. KPIs connect organizational vision to individual action. Every KPI you use helps you measure progress by showing the positive or negative changes occurring over time and helping you measure the distance to reaching your goal.