Tracking Success: 7 Characteristics of Effective KPIs (2024)

For growing and competitive businesses, it is important to constantly evaluate operations. To track their most important business objectives, data-driven teams establish Key Performance Indicators (KPIs), a set of metrics the team commits to driving forward to bring them closer to their goals.

Using KPIs to track business objectives not only forces teams to ground themselves in data but empowers them to engage in a cycle of continuous improvement. After every campaign, metrics-driven teams can check to see how their activities impacted their KPIs, helping them become more effective over time.

Whether you’re establishing KPIs for the first time or re-evaluating your team’s key metrics, keep these seven essential characteristics in mind:

1. Simple

For a KPI to be truly helpful it needs to be simple in two ways. It needs to be both easily comprehended and measured. For example, a KPI such as “how many clients did we add this month” is simple in both ways. Business analytics expert Jay Liebowitz says that an effective KPI is one that “prompts decisions, not additional questions.” Each staff member involved in a goal should know exactly how to effect a KPI. If the goal is clear, such as “add more clients,” staff can make proactive decisions to influence the outcome. Additionally, a simple question like client acquisition is simple to gather. You want a KPI that will raise the overall visibility of the campaign without disrupting daily operations.

2. Aligned

Effective KPIs “cascade from...strategic dashboards to tactical and operational dashboards,” according to a Data Warehousing Institute metrics report.This simply means that KPIs should trickle down from the overall strategic goals of an organization to the daily operations of the staff that are effecting them. While some organizations focus on gaining an ever-growing amount of clients, for other other businesses, this may not align with the overall vision. For example, a business that centers on customer service would have a more central focus on customer retention than acquisition. Make sure that KPIs are always aiding the umbrella goals of the organization.

3. Relevant

Another one of the characteristics of an effective KPI is relevance, meaning that the appropriate decision makers are in control of effecting specific KPIs. For example, a KPI that asks “how many products did we sell during our sampling event” should be the responsibility of the marketing manager. By assigning the responsibility of the KPI to the relevant manager, the measurement will be more educated and the results will be more successful.

4. Measurable

To analyze positive and negative variations from a goal, a KPI must be measurable. This does not always need to be qualitative measurement such as “how many products did we sell last month,” but can also be qualitative such as “how engaged are employees with their work.” The latter can be determined with standardized surveys created through custom forms, even though its subjective nature isn’t numerical. Always ensure that your KPI is based on a solid, focused goal such as sales, marketing, or customer satisfaction. An effective KPI avoids generalized questions like “Improvement in field operations.”

5. Achievable

The National Federation of Independent Business (NFIB) ranks setting “unachievable goals” as one of the biggest employee de-motivators. KPIs must be set with goals that employees feel they can reach. The more realistic the goal of a KPI is, the more likely employees are to reach it. Instead of setting large, seemingly unattainable goals, start small. For example, set monthly goals that employees will be challenged, but not overwhelmed by. By having closer deadlines and smaller goals, the organization can attain the overall growth it aspires to.

6. Timely

Effective KPIs are timely in two ways: Their results are reported on an appropriate timeline, and are analyzed in a relevant time period. Businesses must find a happy medium with reporting on KPI results. Infrequent reports will create difficulty in accurately identifying trends, while reporting too frequently can diminish the value of the collected data. To determine the appropriate frequency of your reports, consider the sensitivity, urgency, cost, and accuracy of the proposed timeline. Additionally, ensure that the results of the report are being acted on in a timely manner. For example, analyzing data from an isolated month in the previous year would not be a good benchmark for your next month in the current year.

7. Visible

Another of the essential characteristics of an effective KPI is its visibility across the entire organization. Growth is achieved more easily when all employees are engaged and aware of the organization’s goals. While there may be parts of the organization that will not actively participate in effecting a particular KPI, making the goal visible will increase employee engagement and set a standard for accountability on future projects. Key Performance Indicatorsare an excellent way to measure the success of organizational and individual goals and these seven characteristics will encourage their success and longevity in any organization.

Using KPIs to Boost Performance

Once you have collected quality data on your team’s performance, you can fill in the three components with which to fuel your continuous improvement cycle: Insights, Planning, and Actions. Ideally, your KPI data will provide Insights on a problem or opportunity in the field that you can address to improve your team’s performance. The Planning component involves analyzing the KPI data to decide when, where and with whom you will address that opportunity, and exactly what steps you should take to deliver the highest impact. Actions are the implementation of changes that reflect the improvements you’ve decided to make based on your data.

KPIs are just one way to collect the data you need to feed the cycle of continuous improvement that will help you and your team succeed in the field. The cyclical process drives peak performance and allows you and your team to make data-backed decisions with proven results.

To learn more about KPI tracking, download our complimentary KPI Template Toolkittoday. And if you are looking for a software solution to track KPIs, be sure to check out Repsly's KPI tracking software.