Examples Of Key Performance Indicators In Business

Submitted by: genwright

A Key Performance Indicator, which is also known as a KPI, is a measurement of performance of a specific department within a business. These are quantitative measurements plotted against a time range and is generally represented in graphs or scorecards.

However, some of the KPIs can also be based on geographic locations, percentage of a whole, etc. Still, when looking at performance over time, a time-series visualization is the best way to show it. KPIs are derived data based indicators that we are using regularly in our businesses to keep track of the various key departments. Read further for a few examples.

KPIs in the area of marketing are really very frequently circulated data. We see it advertised by the companies all the time. One of the most common KPI here is the customer base and customer base growth rate. The customer base is usually used to refer to the total number of unique customers that an organization has and hence the customer base growth rate is the rate at which the customer base is growing. Depending on how successful (or not) the business is, the growth rate can be positive or negative. The customer base is represented in actual numbers, and the growth rate is usually in percentage.

In the area of manufacturing, the usual KPIs are rate of production, volume of production, performance, quality etc. While rates are usually calculated per unit time (units produced per second, units manufactured per week), performance and quality are usually expressed in percentage. The Overall Equipment Effectiveness or OEE is often used as the standard set of metrics to gauge the performance of a manufacturing unit.

In the sales department, the usual KPIs that require monitoring are sales volumes, percentage of refunds, growth, etc. So KPIs for sales are the indicators that show the data representing these factors. For instance, sales volume can be represented in numbers per week or volume per week, depending on the SKU. Out of this number, the ratio that was returned would the percentage of refunds.

There are also KPIs for personal performance of staff. If they are salespeople, these would include the monthly revenue that they single handedly generate. Their growth rate, fluctuation etc can be easily graphed. For websites and global businesses, geographical data is also very important to locate the locations of the visitors and customers.

KPIs are mainly used to keep track of performance, changes and to identify trends and repetitions and deviations from forecast. These are then dissected to find underlying factors, trends, etc. For example, if more clients are buying from the organizationin one area, then the organization needs to make sure of - a) holding the good results area, b) identifying what worked successfully and c) implementing the best practices in other regions if possible. Another application of key performance indicators is problem solving. For example, if a typical week is always depressed for orders, then other factors need to analyzed, for instance customer profiles of those who are buying and those who are not, etc. KPIs thus are essential in business analysis, business planning, problem solving and trend spotting.