KPI (Key Performance Indicator)
If you've been involved with a business in any way, you're probably familiar with the term KPI. In this blog post, you'll get a clear guide on how to implement KPIs in your business.
- Home page " Dictionary " )
- Last updated:
What is KPI?
KPI is an abbreviation for the English term Key Performance Indicatorwhich serves as a unit of measurement of a company's activity. KPIs refer to various objectives that the company must be able to measure on an ongoing basis in order to assess its performance and whether it needs to be corrected. For example, they can be based on the company's mission, vision and current business goals.
KPIs are also set up to give employees an overview of the company's daily, monthly and annual goals. They provide clear success criteria for each employee's performance and point out possible improvements, which should motivate employees and increase productivity.
How you can work with KPIs
A KPI can be set up in relation to sales, marketing, customer satisfaction and employee retention, for example. In order to work actively with KPIs, it is important that they are clear and measurable - if they are not, the company has no chance of evaluating whether the efforts have been effective.
There are initially two types of KPIs:
- Low-level KPI: Focuses on the performance of individual departments in the company.
Objectives at this level are concrete actions that lead the company closer to their high-level KPI. For example, it could be aimed at the sales department that wants to generate leads or the HR department that wants to achieve a higher score in the next employee satisfaction survey. - High-level KPI: Focuses overall on the company and its vision. Objectives at this level should set the direction for low-level KPIs. For example, a high-level KPI could be that the company wants to become more sustainable. For the individual departments, low-level KPIs could be to increase the use of recyclable materials, reduce food waste and reduce the use of physical paper.
Tool for setting KPIs
There are four general phases in working with KPIs:
- Clarification/design
In this phase, the company must decide what the goal is and how it can be achieved. It is important that the goals are neither too big and unrealistic nor too unambitious and vague. A good way to ensure that they are realistic, relevant and measurable is to use the SMART model:
S: Specific - the goal must be specific.
M: Measurable - the goal must be measurable.
A: Attainable - the goal must be achievable.
R: Relevant - the goal must be relevant.
T: Time-bound - the goal must be achievable within a given time frame. - Execution
In this phase, the company must measure, calculate and communicate KPIs according to the goal. It is a good idea to appoint someone who is responsible for ensuring that each goal is met. - Evaluation
Here you need to determine if there is a match between the department's performance and the individual KPI. - Re-design
In the final phase, the company has the opportunity to adjust the objectives based on the evaluation and then repeat the design process.
Examples of KPIs
- Increased revenue
- Number of sales
- Average customer spend
- Number of leads
- Conversion rates
- Number of visitors to an online store
- Number of downloads
- Visibility on Google
- Number of page views
- Return Customers (how many of your customers buy again)
- Conversion rates
- Customer satisfaction.
The company will typically also write down the goals in more concrete terms. For example, the company may want to increase revenue by 10% in the coming financial year or increase the conversion rate for visitors from Google by 5%. Here, you will typically work with online marketing and SEO aka search engine optimization.
If you want more examples of KPIs, Dennis Kronborg provides good examples in an article on his blog.
Frequently asked questions
What is a KPI?
KPI is a term for a company's measurable objectives. They are set up to show the extent to which an objective has been achieved in areas such as marketing.
What does KPI stand for?
KPI is an abbreviation for Key Performance Indicator. In Danish, we often use the English term.
What can you use KPIs for?
KPIs are a metric that is used to assess and evaluate the impact of work, while providing incentive and motivation to work.
More concepts
Want to learn more digital marketing terms? Our digital dictionary is full of them - and we're constantly updating it.
