Economics/Business

Performance indicators examples/categories/importance/best practices

KPI is an acronym for Key Performance Indicator, or Key Performance Indicator, used to measure whether the company’s processes are leading to the expected results and to support strategic decisions. Performance indicators examples

What would you think of hiring with information that would help direct actions capable of leading your company to success? If the possibility sounds interesting, you need to understand about KPI.

There is no magic formula or ready-made recipe to make a business achieve its goals and grow. However, there are ways to make all this possible, including monitoring performance indicators.

Throughout the reading, we will go through the basics explaining what KPIs are and why they are important, until we get to tips on how to apply them in the best way.

What is KPI

If you still don’t know what KPI means, the time to clarify this question has come. KPI is an acronym for Key Performance Indicator or Key Performance Indicator. Performance indicators examples

In addition to the definition of the acronym, KPIs are indicators used to measure whether the company’s processes or actions are having the expected result .

Why? Because what is not measured cannot be evaluated or improved. If you still haven’t seen this in practice, performance indicators will help.

It is important to be clear that when we talk about measurement through a KPI, we are talking about numbers or percentages . Thus, your company will have concrete data to assess its own situation.

With all this, performance indicators, or performance indicators, are an essential part of an organization’s management strategy.

The reason is that, with KPIs, it is possible to monitor the effectiveness of processes, set plausible goals and define the paths to achieve them. 

For this to work, you must keep in mind that an indicator is formed by:

  • measure : every performance indicator, or performance indicator, needs to have a measure;
  • Purpose : It also needs to have a purpose, objective, or target that relates to your measurement. In general, something that translates to another number that represents a desired outcome;
  • data source : still, KPIs need to have a well-defined data source so that the information collected is solid and “clean”, allowing a truly strategic measurement; Performance indicators examples
  • reports : performance indicators allow monitoring the situation and evolution of processes and actions. For this reason, reports are needed for comparisons and other analyses.

The difference between KPIs and metrics

When trying to understand what performance indicators are, it is natural to confuse them with metrics. Incidentally, it is likely that some people think that there is no difference between the concepts, but it is not exactly so.

KPIs are built from metrics. That’s because metrics are nothing more than something that can be measured and there are countless possibilities here.

For a measurement to make sense, there must be a clear purpose. In this way, when a metric is relevant to a business, it becomes a key performance indicator.

Let’s look at an example that fits well with what is incumbent on HR? The turnover or employee turnover, can be either a metric as a KPI. Check it out:

  • turnover as a metric : the number of employees hired in relation to the number of employees laid off in the same period of time measures turnover .

Anyone who works with people management knows that high employee turnover can be linked to different issues and has consequences for the company. Performance indicators examples

  • turnover as a KPI : speaking of consequences, turnover can be used as a performance indicator when used to measure the costs that the company has with terminations and new admission processes.

Thus, more than indicating a problem, the KPI helps to understand its dimension so that the management knows how the situation impacts the company and its objectives.

In summary, we can say that indicators are structured information that arise from metrics and allow for comparisons and analysis.

The categories of performance indicators

Moving forward, it is important for you to know that there are three categories of KPI indicators. Check out!

primary KPIs

Primary KPIs are so called because they are defined first because they relate directly to the company’s strategic priorities .

Another way to understand is to consider that these performance indicators are usually the ones that most attract the attention of members of top management.

Remember turnover as a KPI and its relationship with costs? This can be an example, even considering that, from it, secondary KPIs can be defined.

The idea is that the secondary KPIs serve as a basis for you to know if you have achieved the expected value on the primary KPI.

Following suit, if your company has defined employee satisfaction or organizational climate as factors linked to high turnover , these are your secondary KPIs. Performance indicators examples

secondary KPIs

Continuing with what we are saying, the secondary KPIs are those that justify the primary KPIs by showing how the expected results should be achieved.

That’s why we mentioned the relationship between the satisfaction index and turnover . We are therefore talking about indicators that show whether the strategies adopted are working or not.

practical KPIs

Finally, practical KPIs are the ones that explain the results obtained with the primary and secondary KPIs .

Therefore, we talk about issues that need to be measured and analyzed to understand why the value of an indicator has increased or decreased. Something that helps to better direct the strategies.

The importance of indicators

The lack of strategic planning is among the most common reasons for the early closing of a company.

One of the elements that make up this planning is data, relevant information that can guide senior management in decisions that impact the future of the business.

As we pointed out, a good way to get useful data is by identifying and implementing KPIs. The use of indicators allows the analysis and continuous improvement of the company’s processes and actions .

There are managers who have a vision more adapted to the business world and, therefore, may be able to make some decisions almost instinctively and get a good answer.

Leading a company to success, however, is not something that depends on luck or instinct, although these elements can help. Performance indicators examples

It is necessary to think strategies in a… strategic way. The redundancy is purposeful to emphasize that guesswork is not the way, but concrete information. Data that KPIs can provide.

Of course, even with the data in hand, it may be necessary to test, fail and get it right. The difference is that a north will already be drawn, which considerably increases the chances of success.

KPIs and human resources

We highlighted top management earlier because we focused on the importance of KPIs for the company as a whole. It turns out that indicators also have an impact on every department of the organization.

The turnover was just one example. HR can and must adopt performance indicators that relate to its actions if it wants to become a more strategic sector.

What we want with this brief clarification is to prevent you from getting the false impression that KPIs are only important for the so-called C-Level of a company.

Why use performance indicators

Still have questions about the importance of performance indicators and why to use them? Let’s delve a little deeper into our conversation.

Anyone who starts a business has goals. Even if the dream of becoming a great organization does not exist, performing enough to keep the business alive and sustain itself is something that goes through everyone’s mind.

This indicates that there is at least one goal set, but you need to know how to achieve it. Performance indicators examples

It doesn’t make sense to tell yourself, other leaders or employees that the goal is to “make more money” if you don’t know how this can be possible.

In other wordsthere’s no way to choose a path to follow if you don’t know where you want to go . To define this, it is necessary to measure to understand the scenario and see which issues need to be worked on.

Let’s go back to the turnover once more. If the company has a cash problem and lives with high employee turnover, it can infer that the situation has generated additional costs.

It turns out that defining strategies based on inferences or assumptions hardly works well. Using the turnover performance indicator will make everything clear.

With this, the organization will know what the turnover rate is, how much expense the situation generates and what is the real impact of all this on its finances.

From then on, you will be able to study and adopt retention strategies and measure their effectiveness, reassessing the turnover rate and the costs related to this situation.

KPIs provide hard data and provide predictability . With this, they allow the company to make more accurate diagnoses and define, with more security, which path to follow.

Main examples of performance indicators

Remember how we explained that a KPI comes from a metric? Therefore, basically everything that can be measured has the potential to become a performance indicator.

This means that it is not feasible to list all the possibilities in one post, but we can present you with the main KPI examples. Come on?

Profitability indicators

Making a profit is one of the most common goals of a business. Therefore, the profitability KPI is one of the most used among financial indicators.

This is because a well-designed business strategy does not only consider whether, at each end of the month, the balance is positive for the company. A more robust analysis is needed.

The idea is to calculate profits, extract fixed and variable expenses and, only then, determine if the company’s situation is really favorable. In other words, to determine whether the expected results are being achieved or not .

The profitability indicator is translated into a percentage. If the value obtained is positive, but there is no money available, it is a sign that the company needs to reduce its costs .

Therefore, we talk about a KPI that can be very useful for decision making . Performance indicators examples

Average ticket value

Another of the main indicators used in the corporate world are sales KPIs , which make it possible to measure and understand the dynamics of sales made by the company .

There are different ways to track this dynamic: per sale , per customer or per salesperson. In any case, it is possible to compare the dynamics of the sector and its results, and identify improvements to be made.

Namely, by using the average ticket KPI, your company can obtain information such as which customers buy the most and which are the most loyal.

This data can, for example, be used to design new personalized service strategies, ensuring more positive experiences.

In turn, when the indicator focuses on the average ticket per salesperson, it is possible to assess which ones perform better. Something that gives scope to seek reasons and ways to better prepare or motivate the team.

Effectiveness indicator

Another issue that greatly impacts the success of a business is its relationship with the consumer public.

Therefore, we have the efficiency indicator that allows us to measure the customer satisfaction that the company .

The idea is to know if the customer:

  • would buy or re-hire your company;
  • would recommend the company ― its products or services ― to others;
  • whether or not you found the service satisfactory, etc. Performance indicators examples

The NPS survey , the one that suggests indicating from 1 to 10 how likely the customer is to recommend the company and so on, is one of the most used tools for this measurement.

Note, therefore, that we are talking about one of the simplest performance indicators to implement, as a simple survey by email or message can do the trick.

Absenteeism indicator

Turning our eyes to the internal context of the company again, one of the main KPIs is what measures absenteeism. Here, we are talking about an indicator that is of direct interest to HR.

As you may already know, absenteeism is that “unjustified absence of employees” at work , situations that escape the absences provided for by the CLT .

This is an important KPI, because a high absenteeism rate represents financial loss and reveals that there may be issues that the company needs to investigate.

Lack of motivation, inadequate salary, leadership problems and lack of flexibility or growth perspective are some of the possible reasons.

turnover indicator

Still within what matters to HR, another performance indicator that draws a lot of attention is what measures employee turnover.

In some cases, the same factors behind absenteeism are related to a high number of resignations. However, it is always worth investigating.

Companies that deal with high turnover have higher expenses with terminations, hiring and training. 

Furthermore, they can get a bad image with employees and the market, harming their talent attraction .

Depending on the result indicated by the KPI, HR needs to understand the causes and study what to do, with regard to people management, to make the organization a place where everyone wants to work.

productivity indicator

To close our list of examples, remembering that there are several other KPIs that can be very useful, let’s talk about productivity . Performance indicators examples

Considering time, quality and costs, this indicator shows how much money the company makes with the performance of each employee .

The idea is not just to find out if the worker can generate revenue for the organization, but to understand how efficient the processes are.

If the result is not as expected, the next step is to investigate the possible causes of the problem and define an action plan.

Low productivity may indicate the need for training, improvement of motivation, adaptation of the work environment, among other issues that compete with people management.

How to define and apply the KPI

In a way, everything that can be measured could be turned into a KPI, were it not for the fact that performance indicators need to make sense, have a clear purpose for the company.

A KPI that makes sense for your organization may not be as useful for another, even if it’s in the same industry. And vice versa.

With that in mind, we have three key tips that will help you define the ideal KPIs for your company or a particular industry. Check it out!

1. Search as many indicators as possible

The idea is that you know as many indicators as possible, without letting this search be exaggerated to the point of being unfounded.

Consider that only knowing the possibilities will you be able to define the best KPIs for each situation.

2. Apply SMART methodology in the analysis of KPIs.

Based on the methodology, you will be able to understand more clearly which indicators are most suitable.

For this, keep in mind that there are five factors that need to be thought of: S (specific), M (measurable), A (achievable), R (relevant) and T (temporal). Performance indicators examples

  • S (specific) ― Is the purpose of the KPI clear or does it leave room for doubt and ambiguity?
  • M (measurable) ― is it possible to objectively measure whether the objective linked to the KPI has been achieved?
  • A (Achievable) ― Is the goal linked to the KPI realistic, achievable?
  • R (relevant ) ― on top of all that, is the purpose relevant to the timing and strategy of the company or department?
  • T (temporal) ― what is the time interval, the defined deadline, for the goal to be reached?

3. Consider the company’s mission, vision and values

The concept behind the mission, vision and values trio is something very widespread in the management and business disciplines of formal education.

However, in practice, not all companies bother to make these definitions or, when they do, they forget to take it into their daily lives.

The point is that keeping these concepts in mind is “ having the basis for all strategic planning and decision-making to follow the ideal direction to guarantee better results and the success of the organization”.

For this reason, mission, vision and values ​​must also be considered when choosing KPIs.

4. Apply performance indicators

Once the performance indicators are chosen, it is necessary to communicate them so that they can be worked on.

The idea of ​​defining KPIs is not to create expectations and wait in silence to see if something happens. Those involved in the change and optimization process need to be on top of everything .

Otherwise, they will not be able to do their part so that the expected evolution is verified with each new evaluation of the KPIs in the period defined for each goal. Performance indicators examples

And then? To proceed, you need to know how to analyze performance indicators.

First, you need to understand the KPI and what a low or high number means in each case. Information that must be clear to everyone.

Something also needs to be done about the results being presented through the application of performance indicators.

Consider KPIs as a tool capable of indicating which processes are going well and which are not , which strategies are working and which need to be revised.

Thus, new directions can be made so that the expected results, defined during the choice of indicators, are achieved.

An important tip that seems obvious, but that sometimes gets in the way is not to lose sight of the company’s goals, as well as its vision, mission and values.

We emphasize this because, in the urge to achieve a certain result with a KPI, you may fail to link your analysis to what is most important.

As a consequence, you will promote adjustments and misdirect your focus, thinking only of a number or percentage, and not the macro purpose behind it.

How to stimulate the improvement of indicators

An initial dive into the universe of KPIs, which even involves learning how to calculate performance indicators, can lead to a mistake: forgetting about people. Performance indicators examples

In the end, even though the main objective is the company’s success, its processes and each action have a direct connection with the people, with the professionals who make up the organization’s staff.

Therefore, after thinking about the choice of KPIs and designing their use, analysis, review, etc., turn to those that will help the indicators improve (or not).

Consider carrying out a behavioral mapping to understand the profile of each employee and know how to approach , guide and encourage changes that impact results.

Understanding how each professional responds to each situation allows strategies to engage them in order to improve KPIs to be more assertive.

The conversation with the employees

We emphasize that the application of KPIs does not only involve a team of leaders who, due to their attributions, will monitor the results more closely.

Each employee is part of the process and the behavioral mapping suggestion serves precisely to guide the approach.

It is interesting to explain why each worker is essential and how indicators can improve productivity and other results, bringing benefits to all. Performance indicators examples

It is even valid to make room for employees to present their ideas so that they feel closer, more part of the strategy.

Best practices for dealing with the KPI in the company

It’s always interesting to know tips, or best practices, to successfully execute something, don’t you think? So we have some suggestions to share with you. Look!

Evaluate results periodically

After implementation, it is important to plan and conduct periodic assessments to understand the impact of each KPI .

After all, it makes perfect sense to want to know the advances made by the sector in which the key indicator was implemented and in the company as a whole.

Don’t forget to put these evaluations on the schedule to avoid them being just in the field of ideas, losing the timing and ending up not resulting in reliable data.

Keep teams up to date

As we mentioned, there are people involved in the application of KPIs and actions related to the objectives pursued.

Knowing this, never ignore the importance of keeping everyone well informed and updated about the process .

Teams need to know, among other things, even what should be done if the results show variables.

Have a contingency plan

Speaking of variables, it is prudent to have defined a contingency plan with clear guidelines to be followed in case the KPIs point to negative results .

For this, it is necessary to study the indicators to establish limits that indicate when a result is positive and when it is negative. Performance indicators examples

follow the trends

Sometimes the results analysis of a KPI can become myopic or biased . These are terms used to define situations where a broader view gives way to a focus on already very familiar data.

We are not suggesting that, at all times, you try to see something new from the indicators; one cannot forget the purpose of each of them.

However, when analyzing them, it is important to pay attention and be a little more open-minded to identify possible trends and extract increasingly useful information.

Keep the team motivated

We talked about this before, but we think it is necessary to reinforce the idea of ​​stimulating the improvement of indicators with each employee.

The essence of the application of KPIs is linked to a search for continuous improvement . Thus, we are talking about something that, at best, becomes part of the organizational culture .

This also requires continuous stimulation work, so that the idea of ​​improving indicators is incorporated into the employees’ routine.

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