What are KPIs? How to choose & track your success metrics

You’re beyond ready to start growing your website traffic. You want to increase sales, complete projects on time, and more.

But… how will you know when you’ve met those goals?

There’s a simple answer. You need KPIs.

KPIs, or key performance indicators, give you an objective way to measure your goals. You can select or create KPIs for any kind of work you do, bringing a clear way of communicating your progress and success to your team and executives.

In the next few minutes, you’ll read all about the meaning of KPIs and how you can use them in your business. You’ll see clear examples of how to create and apply KPIs to any strategy and learn about a tool that can help you meet those goals, even as your team grows or shifts strategies.

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What is a KPI?

The KPI acronym stands for key performance indicator – it’s a metric that measures how projects, individuals, departments or businesses preform in terms of strategic goals and objectives. KPIs are a way for stakeholders to see if they’re making progress or if the business is on track.

KPIs are always displayed as a value that shows progress toward a goal, shown in this KPI dashboard from monday.com.

KPIs give you a clear, objective way not just to assess project progress, but also to communicate it to other teams or stakeholders. They also make sure all team members and stakeholders understand how to measure success for any given project.

Understanding how a project is progressing can be critical to its success or failure. 44% of executives say poor communication — like a lack of clear KPIs — leads to a delay or failure to complete projects.

A good KPI should be objective, measurable, and able to show a trend or comparison over time.

The goal is to communicate effectively with your team about your project status, helping things get done more efficiently and eliminating the stress that 80% of employees feel because of bad communication at work.

What are the benefits of using KPI?

KPIs are useful because they:

Keep employees accountable: key performance indicators can track progress down to the individual level. If a sales team’s KPI is the number of monthly sales per person, team leads can easily understand how much each person contributes to the department’s success by whether or not they meet their goals.

Allow managers to adjust: Once managers have KPIs in place, it’s easier to adjust the strategy if the team or individuals don’t reach their goals. This doesn’t need to mean firing the weakest performers; it could mean providing additional training and guidance to those who are struggling.

Make sure everyone is on the same page: it’s likely individuals view success differently. For example, if an IT team member and an accountant work together on a project, they’ll probably measure success differently. KPIs set a standard and common goals for everyone to work towards, making expectations and priorities clear right from the beginning.

Assess a business’s health: KPIs help businesses objectively see how the organization is performing. Financial KPIs for instance, show profitability, while employee retention rates can indicate the strength of a company culture.

Just as KPIs have many benefits, there are also many different ways to approach them. In other words, KPIs aren’t one-size fits all, but they do tend to fall into a few categories.

How do you choose effective KPIs?

It’s possible to Google a list of top KPI examples for your industry or department, and start tracking those right away.

But that approach isn’t going to help you track the right KPIs for your specific project or team goals.

Instead, it’s well worth the time and effort to sit down and come up with a custom list of KPIs that will tell you precisely what you need to know about your work.

Here’s how you figure out the most effective KPIs for your team, project, or business objectives:

1. Clarify your goal or objective. Figure out exactly what you hope to achieve and why it’s important to the project. Remember, you can track multiple KPIs for a single project.
2. Decide what metrics will best tell you when you reach your goal. Some goals might have multiple ways of tracking progress, but not all of them will be meaningful to you. For example, the number of transactions, number of new customers, or the increase in revenue could measure an increase in sales. You can track any or all of these, but you’ll need to figure out which metrics are most important.
3. Figure out what actions you’ll take to meet this goal. The work your team is doing should directly impact the KPIs you choose to track. If you can’t tie a metric to actions, it’s probably not a good KPI.
4. Outline what you must achieve to reach this goal. Now that you’ve selected the way you’ll track progress, translate your goals and objectives into the relevant KPIs. This can be an absolute value or a percentage increase — whatever makes the most sense for your needs.
5. Share the KPI with stakeholders and team members. Effective KPIs are a good communication tool, so make sure anyone involved in an initiative understands what the KPIs are, why they’re important, and what the final goal is.
6. Review KPIs regularly. Project goals and requirements can shift unexpectedly, so it’s important to review your KPIs on a regular basis to make sure they’re still tracking progress in a meaningful way. If you find they aren’t, repeat these steps to find new KPIs that more effectively help you communicate your goals.

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Get SMART when it comes to creating strong KPIs

One common, effective way to create KPIs is through the SMART structure. The SMART acronym applies to goal-setting. Teams often use it for measuring goals associated with employee performance, personal development, and project management. SMART stands for:

• Specific: does the KPI have enough details in order to accurately assess progress?
• Measurable: How will you measure progress?
• Attainable: Is the KPI realistic?
• Relevant: is this KPI useful for the organization?
• Time-bound: what is the time frame for achieving this KPI?

SMART is often an effective formula for developing impactful KPIs. Following the above bullet points, ‘increase sales’ doesn’t meet the SMART KPI requirements, but ‘increase sales by 10% by the end of the year’ is a measurable target that provides enough context to accurately assess performance and progress.

SMART KPI examples by department

There are plenty of KPIs that use the SMART method. If you’re in need of some inspiration, look no further.

Sales

• Increase average order value by X% during Y timeframe
• Develop X new qualified opportunities by Y timeframe
• Capture X new inbound leads by Y timeframe using Z method

Marketing

• Increase conversion rates by X% by Y timeframe doing Z
• Earn X sales qualified leads by Y timeframe, per person
• Increase the lifetime value of customer by X in Y months using Z strategies

Finance

• Improve the gross profit margin by X by Y timeframe
• Reach an X net profit margin by end of quarter
• Keep the operating expense ratio under X% for the rest of the year

IT

• Lower ticket resolution time to X in Y timeframe for A customers
• Open X number of support tickets in Y hours
• Decrease downtime by X minutes in Y weeks

Customer Service

• Increase number of calls handled per hour from X to B
• Raise customer satisfaction (improved with helpdesk software) by Y timeframe
• Lower average call wait time and average handle time from X minutes to B minutes by end of Q1

By now, you may have some KPIs in mind you want to track. While you can do this manually, we have an even better solution for measuring your success.

Measure KPIs and more in monday.com