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KPI (Key Performance Indicator)

If you have had any contact with a company, you are probably familiar with the term KPI. This blog post will give you a sharp guide on how to implement KPIs in your business.

Webamp The team
- Specialist
Last updated: 7. dec. 2022

What is KPI?

KPI is an abbreviation for the English term Key Performance Indicatorwhich serves as a measure of a company's activity. KPIs refer to various objectives that the company needs to be able to measure on an ongoing basis in order to assess its performance and whether it needs to be corrected. They can, for example, be based on the company's mission, vision and current business objectives.

KPIs are also established to provide employees with an overview of the company's daily, monthly and annual targets. They provide clear success criteria for each employee's performance and point to possible improvements, which should motivate employees and thus increase productivity.

How to work with KPIs

A KPI can be set in relation to, for example, sales, marketing, customer satisfaction and employee retention. 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 work has been effective.

Two types of KPIs are distinguished in the first instance:

  • Low-level KPI: Focuses on the performance of individual departments within the company.
    Objectives at this level are concrete actions that move the company closer to their high-level KPI. For example, it may target the sales department to generate leads or the HR department 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 individual departments, low-level KPIs could thus be, for example, to use more recyclable material, to reduce food waste and to reduce the use of physical paper. 

Tool for setting KPIs

There are generally four phases in the work with KPIs:

  1. Clarification/design
    In
    this phase, the company must decide what the goal is and how it can be achieved. It is important that the objectives are neither too ambitious 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 objective must be specific.
    M: Measurable - the objective should be measurable.
    A: Attainable - the objective must be achievable.
    R: Relevant - the objective must be relevant.
    T: Time-bound - the objective must be achievable within a given timeframe.
  2. Execution
    In
    this phase, the company has to measure, calculate and communicate KPIs according to the target. It is a good idea to appoint someone who is responsible for the achievement of each target.
  3. Evaluation
    Here it must be determined whether the department's performance is consistent with the individual KPI.
  4. 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 KPI

  • Increased turnover
  • Number of sales
  • Average customer consumption
  • Number of leads
  • Conversion rates
  • Number of visitors to a webshop
  • 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 also typically set out the objectives in more concrete terms. For example, the company may want to increase revenue by 10% in the next financial year, or it may want to increase the conversion rate of visitors from Google by 5%. This is where you will typically go in and work with online marketing and SEO aka search engine optimization.

Frequently asked questions

What is a KPI?

KPI is a term for measurable objectives of a company. They are established to make visible 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 English, we often use the English term.

What can KPIs be used for?

KPIs are a measure used to assess and evaluate the impact of a job, while providing incentives and motivation for the job.

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