Performance indicators (KPI — Key Performance Indicator), also known as key success indicators ( Key Success Indicator — KSI), are more complex and specific metrics, essential for you to measure the success of a company’s action . They are essential for managing any company process.
Through KPIs, you can monitor your company’s strategies, for example. However, they need to be easy to understand and should not require absurd calculations.
Although the concept is the same, the types of performance indicators vary from one company to another. It’s like the type of product, persona and marketing strategy: each business has its own. However, the question arises: how to create specific KPIs?
In this post, we will give you 8 tips for creating your own performance indicators. Check out!
How to create your own performance indicators?
See how to define specific performance indicators for your business:
Use the SMART methodology
SMART is an acronym that forms the 5 characteristics that a KPI must have:
In the next topics, we will work on each of these items a little more.
Analyze the company’s objectives
What are the main goals of your business at the moment: sell more, increase ROI, get new customers , build customer loyalty or improve market positioning?
If you want to see whether your marketing strategy is working, for example, the conversion rate is an interesting indicator. This analysis, however, is only possible with the company’s strategic planning. Inside it, you will find mission, vision, values and even other plans made based on it, such as marketing and sales.
It is important to define which metrics will be chosen as the basis for creating your company’s performance indicators.
You can choose performance indicators based on the metrics.
Metric is everything that can be measured. It’s pure and simple data, but it doesn’t tell you much about the progress of the business. For example: the number of likes on your Facebook page and the number of visits to your website are metrics, but they do not tell you whether the number of customers increased and whether your company closed the month in profit.
The KPI is an indicator based on metrics, therefore more elaborate and with clearer answers. Example: your customer’s average ticket this month — that is, the average amount each customer spent on your website — brings a more coherent answer about your company’s performance.
ROI is also a KPI, as it is calculated based on the expenditure on an action and the return it brought.
Observe the degree of relevance of performance indicators
In addition to being aligned with the company’s objectives, the chosen indicators must be relevant. This is because there are countless metrics available in a business, but not all of them are necessary.
The most important thing is to create KPIs that measure the value of your product or service. An example: the rate that indicates the proportion of compliments and complaints about your business.
Delimit the time for measurement
To know if your company is truly successful, performance indicators must have a deadline. For example, the six-month customer acquisition cost or the quarterly ROI. This is because the KPI must be updated periodically.
If there is no time, the indicator will just be a lost rate. The average ticket since the implementation of your website may be discouraging (after all, it doesn’t indicate anything), but if it is measured monthly, you will be able to assess whether there has been an increase or decrease in customer spending on your product.
The performance indicators for company management are different from those for Marketing and Human Resources. In the first case, the ideal is that you work with a maximum of 8 KPIS, otherwise, you are likely to end up getting lost in the midst of so many numbers.
But it is also important to analyze and test what works best for your type of business and for your company, specifically.
See your viability
When you create a KPI, you must analyze the feasibility of putting it into practice. Surreal goals will only bring frustration, but the result can be very positive when you analyze realistic indicators.
If your goal is to increase your sales by 200% in one month, the result will probably be negative. But when you think about 30% in three months, the result can be much better.
Obviously, the goal should not keep your business in a comfort zone (increase sales by 10% in one year, for example), but it should be a goal that is possible to achieve.
Rely on a simple questionnaire
The indicators must be aligned with the questions you seek to answer with them.
A simple way to create performance indicators is by answering the following questions:
As you have seen, performance indicators are based on metrics and, therefore, are more complex, but very useful for your business.