For any business these days, data is crucial. Robust data is the only real way to know whether your teams, businesses, or even industries are achieving their goals. But, with the myriad of data points available now, it can be hard to determine what is relevant. That’s where KPIs come into play.
KPI stands for key performance indicator. These are measurable values that show progress toward an intended result or goal, most notably in business (though you can use them to track your personal performance as well). Essentially, they are how teams and businesses track progress towards goals and overall objectives.
High-level KPIs are tracked at a business-wide level, while low-level KPIs are more focused on the performance of individual teams like marketing or sales. Don’t be fooled though, low-level KPIs are no less important. Both of these data sets are key to having a full understanding of whether you are achieving your goals and objectives.
You won’t be the first and certainly won’t be the last to assume KPIs are all numbers. While many of them are, it’s important to think of KPIs as measurements of progress that often go beyond a number. There are various types of KPIs, all of which add value and direction to your business strategy.
Chances are when you think of KPIs, you are thinking of quantitative KPIs. These are ones that can be objectively measured as a fixed unit or value. They are often the most common type and reveal clear, concise, and data-based insights about a business's performance. Often, quantitative KPIs are the ones that stand out most in a report, but relying on them alone may leave valuable knowledge gaps that could lead to bad decision making. They are most frequently reported as a number, cost, or percentage and examples include customer churn rate, lead to customer conversion rate, customer lifetime value, or cost per lead.
Qualitative KPIs on the other hand are not measured by numbers but instead consist of opinions, attitudes or characteristics, often involving human interpretation. This type of KPI is much more subjective in nature than quantitative and is slightly more difficult to measure. A common example of a qualitative KPI is customer or employee satisfaction surveys. The survey itself can be given in the form of quantitative data e.g ‘On a scale of 1 to 10, how would you rate your experience?’ So although the answer will be given as a numerical value, the measure itself is based on a subjective interpretation of a person's opinion.
Leading indicators are a bit like a crystal ball. Okay, not exactly, but they focus on what might happen in the future. As the name suggests, they ‘lead’ to successfully meeting your objectives by showing the progress already made and help keep you on track to hitting your goal. They are used most often as forward-looking indicators to more accurately anticipate what results can occur from a specific business decision. It’s important to think of these as what might happen, rather than what definitely will happen.
A good leading indicator to measure could be customer satisfaction. A high market share or high customer satisfaction score will reflect high future sales or revenue. This might be a more accurate way to gauge future profits, rather than projecting current profits. Once you have established your leading indicator, you can track real-time data against this figure to assess progress and see how close it is to your initial prediction, giving you a chance to take corrective action if needed. Be careful though, if you are using your sales pipeline as a leading indicator, the opportunities may not actually end up converting into sales, meaning your leading indicator will be inaccurate.
Where leading indicators consider the future, lagging indicators focus on the actual outcomes and whether something did or didn’t happen e.g number of deals closed or profits made at the end of the month. They will tell you about what has already happened and are used to gauge historical performance or analyse the impact of a business decision. The obvious drawback of lagging indicators is that as they are backwards-looking, they may provide insights too late so adjustments or tweaks cannot be made to positively impact the result. KPIs like ROI, customer acquisition cost, and revenue churn rate would all be considered lagging indicators.
KPIs are more than just a set of numbers, they help us to really understand the overall performance of both a business as a whole and individual teams. This is important for a few reasons.
It’s almost impossible to know how you’re doing as a team or business without tracking some sort of metrics. KPIs specifically give you focused data points that show how you’re doing within a set period of time. This is great not only to identify any areas that may need improvement, but it can provide an overview of the health of the business as a whole.
At their most basic, KPIs are a report card on company health. Not literally, but think about your goals and objectives as your business's vital signs. KPIs help you track these 'vitals' so you have a full picture of how you’re doing at all times.
The best decisions in business, and marketing specifically, are data-driven. In order to make these types of decisions, you need the data at your fingertips. When you’re tracking (the right) KPIs, you have the information you need to make informed, tactical decisions. Let’s say that your sales team isn’t performing as you want them to. Without KPIs, you will likely be making decisions based on anecdotal evidence and hunches, which will make it harder to actually improve your stats. In that same situation with focused KPIs, you can pinpoint what area of the sales process isn’t functioning and can make changes where they are actually needed.
Good data paints a picture, and well-tracked KPIs are no different. KPIs are especially good at showing us patterns that happen over time, whether that’s a week, a month, a sales cycle, or a financial year. Fluctuations in KPI performance will tell you things you otherwise never see. If your lead generation and sales performance slumps at certain times of the year, that could be a clear indication of seasonality in your industry. Do you see sales spikes when certain marketing KPIs peak? Tracking patterns in data provides really valuable insight and can help you make the right choices for your team and your business. It can be even better when you track your KPIs in a dashboard. At a quick glance, you will be able to see data patterns and make adjustments (often in real-time).
Goal setting is crucial to any business. However, setting goals without supporting data to provide insight can often mean you’re targeting the wrong areas or setting targets that are simply too ambitious (or maybe not ambitious enough!). KPIs are key to setting SMART goals and ones that will actually propel your business forward. Setting and tracking KPIs can also help all of your teams and departments stay aligned and working towards common goals. How? Well, KPIs break down complex data into digestible information that can be easily communicated. When planning and setting targets, ensuring everyone is working together is key, and KPIs are a great way to do that.
Being able to see how they’re doing in real-time means employees are not in the dark about their performance. When they’re doing well, they know that everyone else can see that, but also that they are contributing to the overall business in a positive way. Knowing they are part of a bigger picture provides your team with a sense of purpose and satisfaction.
What about when they’re not performing well against their KPIs? Being able to see the areas where they need improvement provides them with an instant action plan. It also makes it easier to ask for help. It’s hard for a marketer, say, to ask how to improve their performance if they have no idea how they’re doing. But if you can pinpoint the issue to email engagement, for example, they have a built-in action plan.
In the same vein, KPIs can really help close learning gaps amongst teams and businesses. This is where using a KPI dashboard can come in handy. If you group your KPIs together by skillset, team, or some other sort of categorisation, you can track the overall themes. Low performance across multiple KPIs in one area means you either need to upskill your team or possibly even bring in more resource to cover those gaps.
You may be thinking KPIs sound an awful lot like metrics, aren’t they just the same thing? The short answer is no and the difference is more than semantic. So what is the difference? In the most basic sense, KPIs are focused, specific indicators of goal performance.
Metrics are more general, providing an overview of the business as a whole. They are not tied to a specific goal and individually they don’t really provide much insight. Have you ever heard of the term vanity metric? These are the ones, like the number of emails sent or number of sales calls made, that make you feel good but don’t really tell you anything about how you’re doing.
KPIs, on the other hand, are tied to specific goals and outcomes. For a measurement to be a KPI it must have a specific target, a timeframe, and be tied to key business objectives. Metrics can be used to support KPIs, wherein specific KPIs are made up of metrics, then tied to a goal or outcome.
For example, as we said above, the number of marketing emails sent is a metric. To make it a KPI, we need to add more information. If your overall business goal is to create 20% more MQLs per quarter, you will be interested in how many emails are sent, because you will want to know how many email recipients have gone on to become MQLs. The metric will be the email sends, but the KPI will be the conversion rate of those email contacts within the given time frame, in this case, quarterly.
Related reading: The Difference Between KPIs & Metrics
Choosing the right KPI for your business can seem like a daunting task, especially given the sheer amount of data that is available. First and foremost, it’s important to remember that you don’t need to track everything. In fact, measuring too many will defeat the purpose of tracking KPIs at all, providing too much information and making things unclear. So, the question remains, how do you decide what KPIs to track?
Choose KPIs that are directly related to your business goal
By their definition, KPIs are indicators of company performance of specific goals, so any KPI you choose to track should relate to your overall business objectives. For example, if your business is looking to increase revenue, your chosen KPIs would revolve around revenue generation.
So when you’re setting your KPIs ask yourself: what are your company goals? Are there any obvious areas for improvement? What are the biggest priorities for your c-suite?
Make it a team effort
KPIs aren’t just a way of measuring performance, they are a form of communication. To be effective, they need to work within the context of the wider business. That’s why, when you’re deciding on your KPIs, it’s very important to do so at a business-wide level, with input from other teams. Setting KPIs without this cooperative effort will make it much harder for everyone to achieve their goals.
Think about a customer success team. One of their main KPIs may be to increase the trial to customer conversion rate. A great way to measure customer success, right? But if the marketing team is pivoting away from free trials as part of their overall strategy to increase revenue, how successful will the customer success team be? Every team in a business is interconnected, so it’s crucial their KPIs complement not just the overall goals, but each other’s strategies
Consider what stage of growth your company is in
Different KPIs will be important for different types of companies. Start-ups, for example, will have big growth goals, so their KPIs will relate to growing their business as a whole. Established enterprise-level businesses will, in a lot of cases, be more focused on retaining existing customers and controlling costs, so their KPIs will reflect that.
Here are some examples:
Make sure you include both leading and lagging indicators
As we’ve discussed, lagging indicators show you how you did, while leading indicators show how you are doing. One isn’t better than the other. Much like metrics vs KPIs, they work in tandem to provide a robust picture of your progress.
Lagging indicators provide the progress on something that has already happened, for example, the number of customers who have renewed or how many emails have been sent. Leading indicators indicate how likely you are to achieve a goal in the future. They help you predict how you will be doing. Think of KPIs like conversation rate, lead velocity, and so on.
You will likely be familiar with lagging indicators as that is how most businesses measure their progress. That’s because they are easy to track - they already happened - and easy to report on. While it’s always good to know what’s happened in the past, ensuring your KPIs are also forward-looking means you can stay on track and on trend. Identifying which leading indicators will drive your business forward will definitely put you on the path to success.
Avoid vanity metrics
Vanity metrics are those KPIs or metrics that are designed to make a team or department look good that can be easily inflated and provide no real insight into how you’re actually doing. One great example of a measurement that may seem valuable but can easily be a vanity metric is website traffic. On its own, website traffic provides almost no actionable insight into your team's performance and can be easily inflated through the use of paid channels. A better KPI to track would be the conversion rate or even the number of customers that come from your website. These tell you about the quality of your traffic, rather than just the quantity. Perhaps that is the best differentiator between a quality KPI and a vanity metric is that the former has some indication of quality.
It’s also extremely important when you’re choosing and tracking your KPIs to make sure they are SMART, or even better, SMARTER. You’ve probably heard the acronym before, but SMARTER takes your KPIs and targets one (actually, two) steps further.
These questions will help you focus on what matters to your overall business objective, and therefore what KPIs will be effective for your specific situation. What does a SMARTER KPI look like? Here are a few examples:
A large part of making sure that your KPIs and goals are SMARTER is making them measurable. But how we measure these can be tricky. The specific criteria you use to measure will be dictated by the KPI itself. For example, some will be quantitative and others will be qualitative.
The main thing to remember is that KPIs should measure performance, not the activity. Actions, not results. This means that instead of this:
The first example is more of a metric than a KPI because there is no real way to measure actual performance. As we said when we outline the difference between metrics and KPIs, KPIs are more than a quota, they are an indicator of how well a person, team, or business is performing.
When it comes to how to measure specific KPIs, that will depend on what type of KPI it is and what data you are taking into account. For example, a revenue-based KPI will likely be measured in terms of revenue generated whether that’s MRR, ARR, or some other method.
What will be common across all the KPIs you do track, or should be, are the tools you use. There are a lot of ways to track your KPIs, some easier than others. The most common forms of tracking, and importantly, sharing your data will be KPI reports and KPI dashboards.
A KPI report is a type of report that uses a mixture of visual elements - think charts, tables, graphs, etc. - and written elements to make data more accessible and digestible. However, it still provides detailed information surrounding your chosen data points to allow for in-depth analysis. Typically, KPI reports are static documents that you update at a set point in time, whether it’s for a monthly meeting or showing your yearly results.
A KPI dashboard is also a visual display of important information i.e. interactive charts and graphs, but they allow for a quick, streamlined review and analysis. Any good KPI dashboard allows users to explore the data behind their indicators and discover actionable insight. Essentially, a KPI dashboard transforms large swathes of data into digestible packets of information that allow your business to make data-driven decisions. The main driver of a KPI dashboard is that it unites different data sources so that users can easily explore massive data sets in an at-a-glance visual representation.
KPI dashboards are real-time snapshots of specific data points. They update as and when the data gets fed into them, and are a great way to distil complex data down into understandable, actionable packets of information.
Related reading: 6 Benefits of KPI Reporting
KPI reports, on the other hand, are static documents that offer detailed overviews of a much larger picture. KPI reports collate data over a specific time period, for example, if you want to understand how well your outbound sales campaign worked in Q4. KPI reports are used when a real-time dashboard may not be enough to fully gauge the success and draw conclusions, for instance, when you need to see data over a longer period of time.
For that reason, when it comes to everyday tracking and measurement of your KPIs, a KPI dashboard can be really useful. You can then use KPI reports when a fuller picture is needed or when you want to see a more detailed view of your main data points.
Know your audience
When you’re setting up your dashboard, ask yourself - who is this for? Knowing that will make it easier to decide what to include on your dashboard. Is it just for your own use? Or will this be seen by upper management?
Once you know the answer to these questions, ask yourself what they want to see. Or better yet, ask them. It doesn’t hurt to confirm what sort of information your team actually needs to see in your dashboards to avoid any confusion or time wasted.
Different people may want to see different information, and that’s ok. You can always create more than one KPI dashboard for each set of data, or you can get creative with building it out. Just remember not to overwhelm your audience with information.
Keep it simple
With that in mind, another tip for building your KPI dashboard is to keep it simple. If you include too much data or overcomplicate, you are negating the benefits of putting a dashboard together in the first place.
Make sure you’re only choosing the most important KPIs as part of your dashboard. As mentioned above, if you have conflicting audience needs, maybe consider building more than one to avoid overwhelming people with information.
White space is your friend
Just as it’s important to keep your information simple, you also need to ensure the design and visuals of your KPI dashboard make it easy to comprehend. The information is meant to be easily digestible at a glance, so a complicated or overwhelming dashboard design may interfere with this. Being aware of the whitespace in your dashboard will help.
Tell a story
KPIs are useful on their own, but they can be even more beneficial when they tell a story. What does that mean? Well, first off, context is important. Some indicators may need a description, so make sure you have a title and overview that tell the viewer exactly what they’re looking at.
It’s also important to include metrics that show each stage of the process.
For example, if you’re including your lead to MQL conversion rate, you’ll probably also want to include your MQL to customer conversion rate. Including both KPIs means you see the full picture of your leads, whereas only tracking one provides an incomplete story and can influence making the wrong decision.
Make it actionable
If you’ve chosen the right KPIs, this one will be fairly easy to achieve. However, you’ll want to check that you’re presenting the information in a way that can be used to actually evaluate performance and act accordingly.
A good way to do this is to include your overall goals and targets, and to compare your KPIs directly to them. This can either be the previous periods' results, industry benchmarks, or your own growth targets.
Make sure it’s easy to update
Again, this may seem obvious but a dashboard that is difficult to update isn’t fit for purpose. The whole reason for a KPI dashboard is to make it easy to track your progress, part of that is having up-to-date data that shows you the information you need. So when you’re building your dashboard, or even choosing your dashboard software, you want to make sure it’s easy to get the most up-to-date data.
And it’s just as important that you can change the dashboard itself quite easily, especially for certain industries. Industries like SaaS, tech, and marketing change on a whim, and the information you need to track may change regularly. You want your dashboard to make the process efficient and intuitive.
Consider the type of dashboard you want to build
There are a number of different types of KPI dashboards, beyond even what industry or function your team serves within your organisation.
Strategic/Executive: Provides high-level information to managers and executives that allows them to understand the overall health of the business. It will also help identify opportunities for growth or improvement. These don’t need to be overly detailed and should include simple, aggregated metrics.
Analytical: This type of dashboard helps understand trends across different time periods, and takes into account different variables. It will likely contain more detailed data than other types of dashboards because the ultimate goal of the analytical setup is to understand both your goal and the underlying activity of the team/department. It’s also important that these types of dashboards are interactive so that multiple variables can be explored.
Operational: Here, you’ll monitor real-time data in order to flag performance issues in real-time. The most important aspect of these is to provide alerts to specific users and provide the exact information they need to quickly solve the problem and get things back to normal.
It’s clear that KPIs are incredibly useful tools to help track progress towards goals and objectives. Depending on the industry and business type, there are some KPIs that will be more relevant, and others less so. We’ve put together a list of examples for different teams and business types to help you decipher which will be of most relevance to your business.
Marketers are often expected to be the jack of all trades to drive revenue and business growth. Marketing needs to be measurable but in a world full of data what is best to track? Even the most experienced marketing teams can sometimes lose sight of what is important and what metrics provide the most useful data.
Related reading: 6 KPIs that marketers should be tracking
Anyone working in a marketing agency will know it’s fast-paced, high pressure and you will often have clients chasing you for updates, results, reports and more. While each client will have different requirements and goals, here are a few that will give your client reassurance that the money they are spending with you is paying of:
Related reading: KPIs that marketing agencies should track
The goal of most financial KPIs is to measure how well the company is performing in terms of revenue and profits. It makes sense to measure KPIs that provide a clear indication and overview of the financial situation of the company. These can include:
Sales teams are probably the most data reliant teams within a business and are often under a lot of pressure to grow revenue, beat the competition, and increase customer lifetime value, so it’s clear they need to monitor a lot of data. Here are a few KPIs to get you started:
Making informed, strategic decisions is super important in e-commerce. In order to do that, you need to have an in-depth understanding of your business, and KPIs are a great tool for doing that. So what ones should you track? There are an infinite number of possibilities, so it's best to start simple, for example:
SaaS companies rely heavily on monthly subscriptions and repeat purchases. The growth and profitability of most companies, particularly SaaS companies, are highly dependent on data-driven decisions. Some popular KPIs include:
Related reading: 7 KPIs your SaaS company should be tracking
Human resources KPIs analyse how efficient an HR team is in achieving the overall HR strategy and how it’s contributing to the rest of the organisation. Establishing HR KPIs is essential to achieving the best return from a company’s human capital.
Even with the best intentions, you can build and track your KPIs and not see the results you’re looking for. That doesn’t necessarily mean you’re not performing well, the problem could be the KPIs themselves. Here are some of the most common mistakes we’ve seen and how you can avoid them.
Just because you can measure something doesn’t mean you should. We’ve gone through how to choose your KPIs for a reason, it’s important to only track targets that are relevant to you, your team, and your business. Otherwise, you risk having too much information, which is overwhelming and negates one of the main reasons for tracking KPIs to begin with - simplicity.
We’ve said before, KPIs should measure the performance of an action, not the action itself. When you track the action, like making a certain number of sales calls per day, there is no discernable way to determine performance. Yes, a salesperson may have only made 3 of 10 calls that day, but if every one of those three calls results in a sale, have they really underperformed?
Benchmarking can be a useful exercise, but when it comes to KPIs, industry benchmarks mean very little. Businesses who make the mistake of using industry benchmarks to set their own targets are setting themselves up for failure because they’re not taking their own unique circumstances into account. Industry benchmarks are an average, so they take into account the highest and lowest performing businesses. They can also be far too generalised to be of much use. A SaaS company offering a free app will have very different goals than a premium online events platform, for example. And yet, many industry reports would put them in the same category.
Another very common mistake is not regularly reviewing your KPIs. As our businesses grow and evolve, so too should the targets and KPIs we are tracking. What good is knowing the trial to customer conversion rate if you’ve stopped running trials? Ensuring any and all KPIs you do track are current will ensure you’re working with the most relevant information, allowing you to make decisions that will help you succeed.
KPIs should always be a driver for change. Tracking KPIs without following up with a plan of action is useless. The businesses who fail to reach their KPIs, or fail to grow as a result of comprehensive KPI reporting, usually do so because they think the KPIs themselves are the end goal.
Excel and Google sheets are great tools, but they are also very time-consuming. Unless you’re an expert, they can be very manual. If you’re tracking KPIs in a largely manual way, you aren’t really saving yourself that much time. Budget can be a sensitive subject, but a lot of businesses will make do with subpar tools to save money, without accounting for the time they are wasting with manual tools.
Read more about common KPI mistakes here.
As we’ve seen, there are a lot of elements to consider when you’re putting together your KPI strategy. The most important is that KPIs should be tools to help you, not hinder you. If you feel overwhelmed or like your KPI strategy isn’t working for you, don’t be afraid to review and revise. Nothing is permanent. Like a lot of things with business, it will take some trial and error. All you can do is make sure you have the willingness to take action and the right tools at your disposal.