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How to choose the appropriate metrics for your organization using key performance indicators (KPIs)

by Mosaniy Editorial
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Effective KPIs and dashboards fuel corporate effectiveness, strategic planning, employee retention, and financial success. The measured is the controlled. With justification, it has become a cliché. In today’s corporate climate, data is essential for everything from increasing sales and profitability to implementing a business strategy, keeping workers, and enhancing operational effectiveness. However, many companies do not employ the appropriate key performance indicators (KPIs) or dashboards to monitor them efficiently. As a result, businesses may be at risk since they won’t be aware of crucial issues, won’t be able to resolve problems, and won’t be able to set goals. Inappropriately picked KPIs may cause even substantial operational problems that affect the entire company.

With the appropriate data, it is possible to increase productivity, identify and seize opportunities, and encourage transparency, team alignment, and engagement. In reality, data is crucial. In the twenty-first century, judgments should be based on facts. It is no longer emotionally driven.

What are KPIs used for?

  1. Measuring and boosting performance: KPIs aid business owners, managers of efficiency, and other employees in understanding the performance and productivity of the organization. Data can be compared to industry benchmarks, analyzed to find areas for improvement, and used to monitor trends and progress toward goals, such as those in your strategic plan or a project to enhance operational efficiency.
  2. Ensure stable operations: The maintenance of stable teams, systems, and processes is a secondary purpose. KPIs like the speedometer of a vehicle. There is a problem with either your vehicle or your driving if your speed swings frequently. Using a KPI, you may determine whether or not things are proceeding well.
  3. Team motivation: KPIs also allow you to incentivize and reward your personnel in a fair, objective manner that removes favoritism and advances the company’s goals. How can you say that someone did an excellent job if you were unable to inform them how they performed or what your expectations were? Companies are increasingly utilizing KPIs for human resources since they are in line with the expectations of the younger workforce and aid in tackling the present labor shortage.

KPIs and milestones are not the same

Remember that milestones and KPIs are not the same thing. The latter indicate that corporate projects are getting closer to being finished. Although they are frequently used in planning papers, they shouldn’t be mistaken with KPIs because they are data-based.

Three components are included in performance indicators as follows:

  • Objectives
  • Gaps
  • Team Results

How to select the ideal KPIs in 4 easy steps

a) Examine current stats

Identifying whether you currently use KPIs to evaluate the success of your business is the first step. Businesses typically keep an eye on some essential data, such annual financial reports or client comments.

However, many businesses forget to produce more complicated data when they grow. With a direct line of sight to sales or production, small businesses make it easier to know whether the business is doing well or struggling right away.

However, when a business grows, this line of sight frequently gets blocked. Instead of waiting reactively for month-end or year-end statements, which are lagging indicators, learning what you need to know before starting a KPI journey will help you proactively make the appropriate decisions at every level of the business.

b) Recognize your objectives

The following step is to review your company’s goals. This is an essential step in choosing the right KPIs. Knowing our destination is necessary in order to develop a plan of action to get there. Once the goals are clear, we can look at every facet of the business and see how each department or unit contributes to the target.

Finding issues in your company can be done using a Gemba walk and lean concepts. Root cause analysis and Pareto analysis can be used to identify the primary root causes of issues, and structured problem-solving methods or a Kaizen blitz can be used to develop solutions.

c) Decide on the right KPIs

You are now prepared to select KPIs for various business divisions and the entire organization. Good KPIs should include:

1. Specific

Establish several KPIs that motivate employees at all organizational levels to contribute to your broader aims. If you want to increase the company’s overall revenues, the sales team needs KPIs that back up that higher amount.

KPIs should be linked to activities that employees can manage. A team cannot be praised or penalized for a task that they did not initiate.

Be aware of the ways in which KPIs may inspire behaviors that have an effect on other functions. Make sure your production department can handle the extra orders if, for instance, you give your sales team incentives to close more deals.

2. Practical

The information should be simple and quick to gather. In a perfect world, it would be automated. You don’t have to squirm under a machine every hour to gather 17 distinct numbers, multiply them using a tricky formula, and then repeat the procedure.

3. Adequate

There must be enough indicators at each level of the firm, but not too many. When businesses first begin utilizing KPIs, they frequently make the mistake of creating too many KPIs or attempting to find a single KPI that applies to the entire organization.

Common business KPI examples

Here are some typical KPIs for various business sectors and goals:

Financial performance

  • Increases in revenue
  • Margins of net and gross profits
  • Margin by product category
  • Inventory turnover
  • Cash on hand
  • Cash conversion cycle
  • Value supplied by each employee

Distribution and business operations

  • First pass yield
  • Return rate
  • Rate of customer complaints
  • Downtime for both people and machines
  • Capacity use
  • Throughput
  • Scrap rate
  • The period between placing the order to receiving the goods in full
  • The percentage of timely deliveries
  • Rates of accidents and reported incidents
  • Indicators pertaining to waste
  • The quantity of employee innovation ideas submitted
  • The money made off of innovations


  • Conversion rate
  • Number of periodic new contracts
  • Average new contract value
  • Number of sales calls


  • Return on investment for marketing
  • Website and social media traffic
  • Conversion rates on social media
  • Keyword rankings in search engines
  • Average website session length

Human resources

  • Absenteeism rate
  • Training hours
  • Diversity representation
  • Hiring, retention and promotion
  • Remuneration rates

d) Show your staff your KPIs

Your team needs to see the appropriate KPIs and discuss them frequently once you have them. Dashboards are important in this.

On their company portal, each employee can access customized dashboards that provide pertinent KPIs. Additionally, dashboards that display metrics relevant to various departments and the entire firm can be placed on monitors or digital displays all over the place of business.

Automation of data gathering, analysis, and display from equipment is possible with Industry 4.0 or smart manufacturing technologies.

Why is a dashboard good?

Dashboards should be:

  • Regularly updated to maintain their usefulness.
  • Simple and transparent, allowing your team to quickly and easily understand the data and trends and the KPIs.
  • Regularly reviewed to make sure they encourage the activity you want.
  • Served as a focal point for discussions during meetings and team meetings. The information can also be used in regular KPI reports. Place the data where staff members can view it and discuss it to influence behavior toward your goals.

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