What is a KPI: Understanding Key Performance Indicators to Support Business Processes

KPIs (key performance indicators)—Progress tracking metrics that allow you to measure and evaluate the progress toward a specific goal. They are used in various areas of business, including marketing, sales, HR, and production KPIs.—milestones for assessing progress and simultaneously providing analytical data. They help employees make informed decisions to move forward at a strategic level. According to the data serviceGlobal Growth Insights Approximately 41% of IT companies participating in the study use KPI dashboards to monitor performance in real time. Interest in them is growing every year.

KPI (Key Performance Indicators) value

Understanding what KPI is—These are significant financial and non-financial indicators, providing insight into the importance of their measurement. For proper operational and strategic development, it is necessary to consider:

• KPI—Key performance indicator. Accurate data gives a company a clear understanding of its progress toward its stated goal. Measuring KPIs allows for strategy adjustments and optimization of operations to achieve desired results.
• Employee KPI—A specific, measurable indicator of a specialist’s productivity. It is important for developing a fair compensation system, monitoring employee performance, and motivating them.
• KPI system—A performance evaluation method based on a set of measurable indicators. It is a comprehensive platform that helps managers determine the degree to which a company or organization is achieving its strategic and tactical goals.

The core idea of ​​working with KPIs is clearly demonstrated by the quote of a successful American entrepreneur: “In business, what gets measured gets improved.” This means that there is a direct correlation between performance indicators and company growth.

The Importance of Key Performance Indicators

Working with KPIs at enterprises and organizations in any field of activity allows for the following:

• Performance monitoring and measurement. Performance indicators transform abstract business goals into concrete, quantifiable metrics.
• Identifying strengths and weaknesses. KPIs help determine which processes in a company are being implemented effectively and which require improvement. For example, a sales conversion rate below expectations is a signal that the customer engagement strategy or employee training needs to be adjusted.
• Making informed decisions. KPIs allow managers and executives to quickly respond to changes, reallocate resources, and adjust development strategies. This is done based on real data, not assumptions.
• Focus and motivation for the team. Thanks to KPIs, company employees know exactly what results management expects from them. Setting specific, measurable goals helps the team focus on key areas.
• Transparency and accountability of processes. KPIs allow us to accurately determine which actions lead to the achievement of goals, and which—No. Each employee or department is responsible for a specific amount of work. There is a clear understanding of who is expected to deliver a certain result.

KPIs not only accurately reflect the current state of affairs, but also help predict future results according to the company Foundernest the share of organizations tracking 5 or more KPIs has grown from 22% in 2015 to 63% in 2025. By measuring and accounting for performance indicators, executives and analysts can anticipate potential risks and opportunities.

Types of KPIs

KPIs are typically classified by various criteria, such as the type of information they provide and the company’s areas of activity. Let’s look at the most common KPIs:

• Strategic—reflect the overall health of the company and its progress toward long-term goals. They help assess profitability, market share, and customer satisfaction. For example, EBITDA—earnings before interest, taxes, depreciation, and amortization (NPS)—customer loyalty index.
• Operating—Focus on the efficiency of day-to-day business processes. Key Performance Indicators help evaluate order processing speed, resource utilization, and team productivity. For example, AHT—average processing time, CRR—customer retention rate.
• Financial—reflect the profitability and efficiency of resource management. For example, ROI—return on investment, ROE—return on equity.
• Marketing—measure the effectiveness of advertising campaigns and brand strategies. For example, CAC—customer acquisition cost, LTV—customer lifetime value, CTR—clickability.
• Absolute—Specific numerical values ​​that provide precise information about the necessary metrics. For example, the number of products sold, the number of customers acquired, or the average order value.
• Relative—They are calculated as percentages or ratios of certain values. These key performance indicators allow for comparisons across different conditions or time periods. For example, the conversion rate helps evaluate the effectiveness of advertising campaigns by comparing visitors with buyers.
• Short-term—are used to monitor operational tasks. For example, SR—FCR (Fast Response Time)—problem resolution on first contact.
• Long-term—help evaluate business progress over months and years. For example, CRR—customer retention rate, CAGR—average annual growth rate of the market.
• Lagging—reflect the results of past actions. For example, quarterly profit or market share after a marketing campaign.
• Leading—indicate future trends. For example, counting the number of new leads provides an idea of ​​the expected future sales growth.

Companies don’t need to measure every KPI. Among the commonly used ones, they should select those that reflect the success of certain actions, initiatives, or resource deployment. 

How to choose the right key performance indicators for specific areas of activity

There’s no universal approach to selecting KPIs. The set of relevant indicators is determined by the specifics of the business, the type of operations, strategic goals, and other factors. To select the most relevant KPIs from existing ones, it’s necessary to analyse:

• Business type. For B2C, customer interaction control is a priority. Key KPIs: customer satisfaction, conversion rate, sales revenue. In B2B models, long-term partnerships, scaling, and evaluating negotiation effectiveness are important. Key KPIs: number of closed deals and new contracts, partner satisfaction.
• Industry. In e-commerce, key performance indicators—average order value and customer acquisition rate, conversion rate. For service companies, – order fulfillment speed, customer satisfaction, and repeat purchases. For manufacturing companies—volume of manufactured products, their cost and quality, efficiency of resource use.
• Strategic business goals. For companies focused on rapid growth, KPIs should focus on revenue growth, market expansion, and customer base growth. If business stability is a priority, KPIs reflecting cost optimization and improving customer retention should be considered.
• The company’s internal specifics. For companies focused on developing new products, the number of product categories and the time to market are important. If the priority—Quality requires taking into account the percentage of positive customer reviews, the number of complaints, and warranty claims.

Measuring all performance indicators takes more time, and there’s no guarantee that the resulting data will be used correctly and in a timely manner. It’s important to focus on those metrics that play a key role in achieving business goals.

Examples of KPIs for different positions

A few examples will help you understand what it means to identify key performance indicators.

KPIs for accountants

Among the key indicators for assessing performance are:

• accuracy of financial reporting;
• speed of accounting operations;
• timeliness of tax reporting.

KPIs for sales managers

Their effectiveness is tied to quantitative and financial indicators. Among the main ones:

• sales volume;
• number of new clients;
• average order value;
• lead to customer conversion rate.

The general algorithm for calculating KPIs involves several simple steps: defining a goal, creating a simple formula, choosing a measurement period, and interpreting the results. However, without professional knowledge and skills, this can be a challenging task. The team at the Art-Marks advertising agency has been successfully working with projects of varying complexity for over five years. We help develop businesses and take them to the next level. We successfully implement complex projects using proven tools. We will define KPIs for your business to accelerate the achievement of even the most ambitious goals.

References:

1. Kaplan, R. S. & Norton, D. P. (1992). The Balanced Scorecard: Measures That Drive Performance. Harvard Business Review, January–February, 71–79.
2. Key Performance Indicators for Dummies./Marr, B.//—Wiley—2021—pp. 110–183