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The Strategic Importance of KPIs in Business

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The consistency of the results determines the growth and ultimate success of your company. Those results can only be achieved if your team consistently meets the desired goals and targets.


A good KPI acts like a compass: a measurement of where your business is, relative to where it has come from and where it is going.


KPIs translate your business strategy into manageable, operational actions, based on the data you collect and monitor. They represent a core component of the information needed to understand a company’s progress. However, many businesses aren’t leveraging the power that comes from understanding their data.


Failing to invest in compiling accurate business data, beyond the typical financial statements and reports, means business owners will continue to rely on “gut feelings” and assumptions when it comes to producing decisions.


But there is no substitute for concrete numbers when it comes to measuring the health and understanding the direction of your business.


With the wealth of data and insights available to businesses in the digital age, CEOs and managers should be honing in on this valuable resource.


Now more than ever, businesses need to be collecting forward-looking insights that shape general strategy and inform daily decision-making.


Basic Definition


A KPI (key performance indicator) is a quantifiable measure a company uses. This is to determine how well it’s fulfilling its operational and strategic goals. It embodies a strategic objective and measures performance against a goal. These are placed to Business Intelligence (BI) to gauge trends and assess tactical courses of action.


A key performance indicator is commonly divided into two categories. These are outcomes and drivers. The outcome KPIs measure the output of recent activity while driver KPIs measure activity in its current and future state. It is substantial to think clearly about what metrics really drives your business because not all metrics are KPIs.


Companies use KPIs at multiple levels to evaluate their success at striking targets. The low-level KPIs may focus on processes in departments like sales, marketing, HR, support and others. On the other hand, High-level KPIs may focus on the overall performance of the business. This allows you to accurately assess which performs on the prescribed standard. You can integrate your own KPIs base on the company’s own strategy.


Importance of KPIs


Not only are company key performance indicators critical for monitoring financial performance, but they can also help to improve crucial factors.


Why KPIs are important:


Goal measurement: KPIs represent the measurements for you to know if your business is achieving its strategic goals or not.


Providing information and feedback: It provides a simple, insightful snapshot of a company’s overall performance. It is reliable, real-time information for effective decision-making.


Education: It fosters an atmosphere of learning in an organization as they generate conversations between staff that can lead to innovation and provide a more thorough understanding of the business strategy.


Staff morale: Receiving positive feedback or incentives for meeting KPIs is an effective way to encourage your staff and motivate them to be more productive. In measuring outcomes, quality work cannot be easily overlooked.


Consistency and continuity: The measurement of a KPI should remain consistent even if people, priorities, and goals in business may change over time. It’s vital for monitoring the ultimate strategic goals.


To deliver high-impact KPIs, you need to be mindful, and it’s essential to an organization’s performance and growth. Further down we noted characteristics of successful KPIs to guide you:




It must be simple to understand and measure. Employees should be experienced to perceive what the KPI measures and how it is being calculated. Including a focus on a minuscule number of KPIs enables employees to apprehend at a deep level what behaviors the KPI is driving and modify the KPI to deliver better results.




An effective KPI cascade from strategic dashboards to tactical and operational dashboards. It means that KPIs should trickle down from the overall strategic goals of the organization to the routine operations of the employees that are affecting the KPIs. When KPIs share a link from the C-level to the entry level, they support unified goals and actions.




KPIs must be measurable for employees to analyze their own performance. It doesn’t need being quantitative to be measurable. For instance, a qualitative KPI such as you can measure the satisfaction of the customer with your service through feedback surveys.




Jay Liebowitz a Business analytics expert states that an effective KPI is one that “prompts decisions, not additional questions.” The employees must clearly understand what they need to do to influence a KPI so that they can work towards it.




The results of KPIs should be reported frequently and in a timely manner so that employees can develop on-time decisions but not too frequently so that they are overwhelmed with data. The company should consider how urgent, sensitive, accurate and costly measuring the KPI is before deciding how often to report thereon.




Making KPIs visible across the company communicates with employees how their work is affecting the organization’s overall goals. It will encourage them to work harder and be more productive. The objective, status, and outcome of a powerful KPI are meaningless. It means the need for building effective tools to communicate KPIs through dashboard and email is essential.




The KPIs are important in reaching your company goals by allowing you to make systematic and timely adjustments. But you must ensure those goals have the potential for you to create actionable KPI’s based on them. Always establish specific goals. Those that allow you to create the necessary KPI’s to improve the overall results of your business. If you want to learn more about key performance indicators and other digital marketing strategies, don’t hesitate to contact us.





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