key performance indicator
- Published :2/16/2022 11:00:00 AM .Feb.16
- Authors :Mahdieh PIRI
- Last update :
What is KPI?
Nowadays, all businesses that want to reach success need a measuring tool for their goals. The KPI (key performance indicator) is the same tool that businesses need to have an indicator to measure their goals to know how much are they working? How much time is left to reach the goal? Are they on the right way to a goal? Luckily all of these questions have answers, KPI.
key performance indicator (KPI) is a measurable variable that shows how successful a company has been in reaching its key goals? If you don't have KPI, you can't get a suitable reflection of your function. Actually, companies use these indicators to evaluate successes that help them reach their goals.
Also, it helps you to have complete information about your actions from the beginning and save them. Sometimes companies use known key performance indicators in their business. Then after a while, they notice that it isn't suitable for their business and can't have positive changes in the company work process. KPI's have their own special rules. If your information is clear, the results will be more understandable.
How can we implement KPI?
You need five levels to implement KPI in your business:
Review your business goals and analyze your performances. Also, you can set long-term and short-term goals in KPI and review plans with your team. Now check for progress and reset.
Types of KPI
time: it's related to starting a product from idea to sale.
The time between Start and end production process: the length of time that is especially for a process.
Out of stock: Indicates the number of times or days a product is at zero stock equilibrium. Market stock refers to market stock by a product in a process.
Inventory turnover: the direct relationship between consumption and comparison in stocks.
Turnover: Employee replacement rate is related to the numerical difference between acceptance and dismissal.
Average sales: Total revenue is divided by total sales.
Different between KPI and KRI
KPI is an indicator for measuring performance, and it doesn't relate to results. Because every result that we get is the outcome of performing several different activities, for having a main good result, you should measure several activities called KRI (key result indicator). KPI tells you what to do, but KRI shows your work's results.
Example of KPI
Profit: this concept is one of the important KPIs'. Don't forget that you should analyze net and gross profit to know whether your company is producing high efficiency or not?
Cost: find the best way to reduce and manage your expenses.
The cost of sold products: gathering all of the expenses you paid for products to know what you should do in competition with competitors?
Sale based on area: from analyzing areas that meet sales goals, you can better reflect on inefficient areas.
The time of customer value: this case helps you find out the value of your organization from a long-term relationship with customers
Cost of customer purchase: This is one of the most important e-commerce metrics because it can help you evaluate the effectiveness of your marketing costs.
Customer satisfaction and retention: You can use multiple performance metrics such as customer satisfaction and CSR scores for customer percentage and repeat purchases to measure.
The number of customers: By analyzing the number of customers you have gained and lost, you can find out whether you can meet your customers' needs or not.
Benefits of KPI
KPIs let you measure results: Measuring is an essential part of KPI, and it's the main tool that tells you about your successes or failures. You should measure advances of your goal, like increased sales, number of new customers, or everything in your business that you want to measure. KPIs show measurable information because they are measurable and used as the criterion.
KPIs help you set your businesses goal: You should set a goal and plan for it. Also, you can set more than one goal, measure your advance, and then try to reach your goal. Awareness of existing conditions helps you set goals and choose better of them.
KPIs help you to find problems in strategic business: Managers can use KPIs to recognize all kinds of problems in the company. They enable businesses to find problems and take the necessary steps. This method helps to resolve common issues in the future.
KPIs help you to discover your strengths:With KPIs, companies can quickly identify their potential, take advantage of every opportunity, and lead to increased business performance. Each score on the KPI dashboards indicates the performance of the organization.
What is SMART KPI?
SMART KPI stands for the following words:
Specific: your goal should be as transparent as possible.
Measurable: you need to be able to measure it, analyze it, and measure the output.
Attainable: it should be accessible.
Relevant: it should be related to you and your goals.
Time-Bound: has timeline and expiration date.
In fact, SMART KPI means that you should SMART your goals first and then define the right indicators to achieve them.