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How to Develop Key Performance Indicators
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How to Develop Key Performance Indicators

Key Performance Indicators (KPIs) Explained

Introduction to KPIs

  • Erica Olsen introduces the concept of Key Performance Indicators (KPIs), defining them as quantifiable outcome-based statements linked to goals or objectives.
  • KPIs serve as a measure of progress towards strategic goals, emphasizing their importance in performance management.

Attributes of Effective KPIs

  • The effectiveness of KPIs hinges on four key attributes that ensure they work well for an organization.

1. Measure

  • A KPI's measure should be clearly articulated; for example, specifying "number of new customers this year" rather than just "new customers."

2. Target

  • Targets must be numeric and time-bound, such as aiming for "a thousand new customers by the end of the year," ensuring clarity and accountability.

3. Data Source

  • Identifying clear data sources is crucial due to potential fragmentation in organizational systems, which can save time in reporting.

4. Frequency

  • Regular reporting frequency is essential; ideally, organizations should aim for monthly reviews to track KPI progress effectively.

Types of KPIs

  • Different types of KPIs include:

Raw Numbers (Widget Counting)

  • Basic metrics that count items but may lack narrative context; useful but need enhancement to tell a story.

Progress Indicators

  • Expressed as percentages (e.g., percent complete), these indicators help track goal completion without needing extensive data.

Change Type Indicators

  • Metrics like "percent increase in sales compared to last year" provide more context and narrative around performance changes.

Enhancing KPI Measures

  • To improve storytelling through metrics, consider framing measures like “percentage of new customers acquired compared to the same time last year.”

Leading vs. Lagging Indicators

  • Understanding leading and lagging indicators is vital; for instance, sales figures are lagging indicators while pipeline metrics can serve as leading indicators predicting future outcomes.
Video description

Build your AI transformation Strategy in 30 Days 🚀 ➝ https://onstrategyhq.com/ai-contact-2/ How do we develop key performance indicators (KPIs)? KPIs are associated with goals and objectives. What do you want to achieve, and by when? KPIs answer the quantifiable piece of your goals and objectives and are the heartbeat of your performance management process. They tell you if you are making progress. Four must-haves for KPIs to work: 1. Measure - the verbal expression of what it is we will be measuring 2. Target - the numeric value that we want to achieve 3. Source - identifying where the data is coming from 4. Frequency - how often you will be reporting on the KPI Different types of key performance indicators: ● Raw numbers ● Progress ● Change To develop better key performance indicators, we utilize leading and lagging indicators. For example, a percentage increase in sales is a lagging indicator because it occurred; it’s an outcome. To make sure you’re on track, put a KPI in place to identify whether you’ll hit that increase or not. We want a combination of leading and lagging indicators when we look at our performance every month. Now that you understand how to develop key performance indicators take your organization to the next level by achieving answers and tracking your goals and objectives. Learn more from our website below. More information is available at https://www.OnStrategyHQ.com Download the guide here - https://onstrategyhq.com/kpi-guide-download/