Excel template key performance indicators
Everything you need to know about KPIs!
Article written by : Shrey SONI
KPIs in simple words stand for Key Performance Indicators, Let’s see what are insights that we need to understand about the KPI in general.
“Numbers never lie”, therefore every company cross checks its overall growth using quantifiable and certain metrics commonly known as Key Performance Indicators.
KPIs are metrics that are used to calibrate a company’s overall performance in a given set of time range. KPIs are used to ascertain companies strategic, Financial and operational growth. It is used to cognize the overall growth in the company in comparison to its competitors.
Key Performance Indicators vary from industry to industry, as every different industry has different metrics to judge its growth in the market and behave accordingly. KPIs are severely important to industries as these metrics help to understand the key takeaways that a company should focus on to uncover new ideas for the growth of the company
Let’s understand KPIs from a decent example
Software companies measure their growth from its user to software usage, which determines its revenue from year to year.
A company in the FMCG industry, measures its growth by measuring its sale of the product, from year to year, irrespective of the user.
So, now you must be thinking why is KPI necessary! Let us elaborate on it more for you.
How is KPI Effective for companies?
We all understand that KPIs are important, but why?
KPIs are the numerical definition of the company’s objective i.e vision and mission statement in all together. As every company adopts different objectives and follows a different set of rules to fulfil that objective, KPI’s just help to sort down the objective with profits that the company aims to incur in future.
KPIs differ company to company depending upon the objective and industry they are serving in, so with each different metrics, it is very important for these companies to determine their KPIs so that they can strategically implement them to measure their success in the market and assign new goals to cover the growth of the company.
When a company is defining its KPIs it should pay major attention to all usage and growth factors that the company has to offer and achieve, as these well defined KPIs make a change or shift in the growth of these companies.
Ex. Orkut and Facebook.
Facebook KPIs to measure its growth in its initial years determined its growth in the world, and different objectives and KPI implemented by Orkut in the same market segment made it go out of its relevance in the world.
Gaining a true insight of the business in real terms backed by numbers is done in KPIs, which tell the true value of the company and help to predict the growth of the company.
Now, another question must be popping in your mind!
How Should You determine KPI?
KPIs are way more tricky when it comes to groundwork, as we mentioned above KPIs are hard to determine and require expertise in getting the perfect segment and metrics to choose for a constant growth or a J curve.
When Determining the KPI, you must discuss & ask the following questions with you and your team members.
- What is our desired outcome?
- What, who & how is someone responsible for the outcome? 3. Roadmap to achieve the desired outcome?
- Steps to measure the process and outcome?
- How to determine that we’ve achieved our results?
- How to measure progress and review it on the way?
These are important and don’t miss them as they determine the upcoming future of the companies, every fortune 500 company brainstorms very rigorously on its KPI for the upcoming fiscal year.
With these questions to uncover your KPI answers, understand that these KPI answers will be different for each company and will change according to its stage i.e growing stage, revenue generation stage & expansion stage. Every company at a different stage of its growth will have and incur different KPIs to determine its growth in the market.
Well, let us help you to ease out with the work of KPI generation, As KPIs are just another form of Goal statements, so we can and will apply the SMART formula here,
SMART? Yes, “SMART” i. e Specific, Measurable, Attainable, Relevant and Time Bound
- Is your KPIs specific and delivers the right set of information that is measurable numerically?
- Is your idea of KPI measurable by all terms? and can it be plotted in graphical format for easy understanding?
- Is your KPIs realistic enough to be attainable to you and your people? 4. Being optimistic is great. But have you got hold of its relevance in real-time and the real world?
- Have you backed your KPIs by time? Is it something you wanna achieve in a given time frame?
We expect You got an idea of what KPIs are and how to determine them. But why are they important?
Why are KPIs important?
Every new year, companies determine their KPIs for the upcoming future and cross-check their growth rate with previous data.
But why is this process important?
Let’s discuss it in more depth, KPIs are something that majorly emphasizes and helps companies determine growth rate, competition monopoly and wins’ against the other top competitors of the company.
Investors and stakeholders invest or bet in the growth of a company just by looking at these data or KPIs,
KPIs are communication channel of the company, KPIs are one of the ways that are most prominent in a way to communicate with all stakeholders, as sharing the important data with your stakeholders will let them know about the KPI risk, goal statement and work process that company is going to incorporate to achieve its goal statement. Most of the organisations fail or avoid doing this and this is something we’ll not recommend anytime, being accountable and sharing your mission and vision statement with your stakeholders will hold them more accountable to the company.
Knowing “what’s” and “why’s” is important, being contextual with KPIs is important, as you must be able to answer what are you trying to measure and why are you trying to measure.
Disclosing your KPIs will help your employees understand better what they are working for & why they are working in that direction.
So now let’s discuss the final point on the KPIs
How to review your KPIs?
After creating your KPIs you need to review it so that it is error-free and actionable on the ground to implement and gain benefits from it.
- As you need to ask questions to discover KPIs for your company, you need to review the KPIs of your competitors to draw significant differences that will get you an advantage and more profits from the market.
- Keep evolving your KPIs with different stages of completion, be ready to evolve and be relevant to your growth to maintain that growth at every stage.
- Are you covering up the right metrics to start with and what other metrics you need to incorporate later in that stage. Ex, getting more users is your
goal, measuring the number of users will be your major KPI, but later on user feedback, user retention needs to be incorporated.
- Use KPIs as your performance management framework to determine the true success and growth rate of the company and individuals.
KPIs might seem outdated concepts with more and more data flowing in, but they are still relevant and have major use cases in determining the success and growth of the company, KPIs just need to communicate well across the organisation for maximum benefit.
Let us know your thoughts on Key Performance Indicators, and how are they relevant to your business.