The acronym KPI comes from the English Key Performance Indicator, and its translation is Key Performance Indicator, being used in all companies.
KPI's are used by organizations to measure the performance levels of all areas of the company, such as people management in startups where each one has its specific.
When KPI's are well defined, the company can understand how each area or applied strategy is behaving and what stage it is at.
In this content we will see a little more about these indicators, their importance for your company and which are the main categories.
What is the importance of KPI for your business?
Before even talking about the importance of a KPI for your organization, we need to delve a little deeper into its concept and purpose.
They are directly linked to the Balanced Scorecard, thus making it essential for monitoring any strategy, measuring metrics and ensuring a detailed view of all events.
The Balanced Scorecard is a methodology that uses these indicators to:
Achieve an integrated and strategic progress balance;
Growth;
Productivity;
Competitiveness.
Therefore, KPI's can help financial administration , for example, to control accounts payable, receivable and other numbers that will impact the health of the company.
Difference between KPI and metric
A point that is still very confused among people is the relationship and concept of KPI and metric, where many think they are the same thing.
It is important to emphasize that they are not the same thing, but a metric can become a key performance indicator if used correctly.
Therefore, in the same way that it is important to know about people management, what it is and how it works, it is essential to understand which metrics will become KPI's and which will not.
Finally, once a metric has started to become indispensable to the progress of a strategy, being valuable to the company, it needs to be treated as a KPI.
How to choose a KPI?
Now that we understand the importance of a KPI and how it differs from goals, let's understand how to choose one in the best way possible.
Relevance
The first step is to choose those KPI's that will really bring information that adds to the business, unlike vanity metrics, such as likes and comments on social networks.
Focus on what brings concrete information and results to the strategy.
Frequency
Choose those KPI's that have updates and can be measured frequently and periodically, as they showed the impacts of everything that was applied over time.
Help in decision making
All steps taken in an organization need to be based on data and information, so your key indicator should help you take those steps and make the journey easier.
Types of KPI's
Key Performance Indicators can be diverse, but they are divided into types for a better understanding and definition.
These different forms of measurement can be divided into three categories, the primary and secondary KPI's, in addition to the practical ones.
Below we will see a little more about them.
primary KPI's
They are the main ones for the objectives defined by the company, showing results in a more monetary scope, that is, everything that is bringing profit to the company.
Just as the face-to-face human resources management area measures hiring, for example, the Marketing area will raise:
Leads;
Conversion;
Traffic ;
Lead Cost.
Finally, everything that will be shown in meetings to monitor the strategies can be defined as a primary KPI.
secondary KPI's
The secondary key indicators serve to reinforce the information presented and raised in the primary KPI's, justifying each number.
Taking into account the examples within Marketing, these indicators can be:
Cost per visitor;
Subscribers to the blog or newsletter;
Traffic source.
Always focus on what will show the why of everything that was shown in the primary KPI's, so you will be able to define the secondary ones in an exceptional way.
Practical KPI's
These indicators are already more present in day-to-day tasks and in tests carried out within a campaign or strategy, to justify what is found in secondary ones.
This list of indicators is already longer than the previous ones and can be:
Pageviews;
Best landing pages;
Most searched keywords (according to your business);
Most read/visited content;
Visitors (new vs returning).
Therefore, the deeper you go into the strategy, the more KPI's will be needed so that everything is monitored coherently and that it brings relevant results to the company.