You may have seen the signs. If not in your workplace, then certainly as a joke in a TV comedy or movie. “X days since our last workplace accident.” It’s a (justified!) celebration of an injury- and accident-free workplace, and is an example of key performance indicators.
Key performance indicators (KPIs) are essentially measurements of how an organization is doing based on defined parameters. These parameters can vary based on what the organization needs to report.
Key Performance Indicators – What The Heck Is That?
Key Types of KPIs
There are many types of key performance indicators aimed at all sorts of industries, groups, and goals. Only a few, however, really apply to the sales and marketing areas and can be limited to:
- Input Indicators: These indicators highlight whether a given resource’s usage has gone up or down when the same outcome is generated. The following statement is an example: “The number of new leads generated is comparable to last year’s levels, but our marketing budget was fifteen percent lower this year, indicating increased efficiency in lead generation.”
- Process Indicators: Process indicators tell a business whether its processes are as efficient as possible. For example, “Dollars spent per new generated lead have decreased significantly year over year, which indicates substantially increased efficiency within the marketing department.”
- Output Indicators: Indicators focusing on outputs highlight the results of a process. A great example of this is, “Marketing budgets have remained flat this year. Our web traffic has, however, increased tenfold since this year’s marketing campaign began; we are extremely pleased with the skill and efficiency of our marketing department.”
- Directional Indicators: All of the above are directional indicators, which tell an organization whether it’s improving or not. E.g., “Due to industry pressure, our marketing budgets have trended downward in recent quarters, but we are excited to report that our revenue is far higher than analysts expected for this quarter.”
Developing KPIs the Right Way
Organizations should set out to develop key performance indicators based on their defined business goals. KPIs are measurements of progress and performance, and do not necessarily overlap with a business’s stated goals.
KPIs are really about change measurement. As you develop proper key performance indicators, you should have an existing process in mind, as well as an idea for how that process should be performing (or how you’d like it to perform). Once the process goals are in place, it’s about gathering data the right way and taking a look at why process variations happen.
Some efficiency-minded businesses follow SMART criteria as they develop KPIs: the KPI has to be as Specific as possible in its value to the business, it needs to have a Measurable component, the business’s stated goals need to be Achievable, performance increases need to be Relevant and important to a business’s success, and a KPI has to be Time-phased, or tied to a specific, predefined time period.
Here’s a case study: in the past few quarters, new customers have been lagging and sales numbers have dropped. You decide to address the new customer issue by putting a marketing plan into place, noting the business’s customer conversion goals, and, at relevant time points, checking in with your sales staff to receive updated numbers of new customer conversions. This number, when compared with historic and present numbers, will give you an indication as to whether your marketing plan is performing as well as you might have expected.
Using SMART criteria, you can develop meaningful key performance indicators for your business that provide you with a check-in point about a desired outcome or goal. A KPI may not provide solutions to performance issues, but it’s an amazing way to see how you’re doing in any given area.