Delivering high-impact key performance indicators (KPIs) is crucial to a company’s performance and growth. However, not every company understands what makes a good KPI or how to go about setting one.

Every company is unique and, therefore, their KPIs will also be unique. But all successful KPIs contain the same key attributes.

To optimise your KPIs, it is important that they have each of these four characteristics:

1.   A good KPI is simple

Ask yourself these two questions: How easy is the KPI to understand, and how easy is it to measure? KPI’s should assist decision making, not raise further questions. Staff at every level of the business should be able to understand how the KPI is calculated and what they can do to positively affect it. The KPI must be a single metric that can be benchmarked and measured over time. The simpler, the better.

2. A good KPI is measurable

KPIs need to be clear. They can be qualitative or quantitative but not open for interpretation. For example, if you are striving to improve customer satisfaction, a good KPI might measure the number of customer complaints or the percentage of customer renewals, which will provide you with clear trends as to how satisfied your customers are.

It is imperative that all KPI information is captured accurately and stays relevant with the business over its life cycle. It is not efficient to change a KPI for the sake of incremental growth or declines in the business. However fundamental changes to your business may mean adaptations are required to your KPIs. Your metrics should focus on factors that enable growth but highlight issues in tougher times. Place emphasis on linking KPIs to key drivers of the business that relate back to wider strategic goals so effective decision making can occur.

Read more: Harnessing KPIs for Better Business

3. A good KPI is achievable 

KPIs should be aspirational as you work towards your long term strategic goals, however milestone targets should be implemented to help track and foster progress towards these long term goals. 

If you want to disillusion and demotivate your staff, give them goals that they will never reach. KPIs must be achievable so that you have buy-in from all levels of the business. But they must also be reported to stakeholders that hold the power of influence to ensure process adherence, make efficiency changes or even improve the overall performance of the business.

4. A good KPI is actionable

Staff should know how to take action to influence a KPI. A good KPI prompts decisions and leads to action in a business. For this to be possible, you should be able to exercise control of the events grounding the KPI. There is no point in measuring something that cannot be improved.

Assuming a KPI is simple, measurable and achievable then the stakeholders can regularly report on their progress to the business owners/board, creating greater accountability within the organization.

KPIs should answer questions

Bellingham Wallace Business Advisory Manager Matt Smith says a KPI’s job is to tell you one of these three things:

• Am I safe?
• Where can I grow?
• Where can I improve?

What does a KPI look like?

KPIs are measurable values and tend to be:

• Percentages.
• Industry indexes (benchmarking).
• Rankings.
• Ratings.
• Ratios.

Learn more about using KPIs to maximise your business performance in our free ebook!