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Definition of Key Performance Indicators:

Key Performance Indicators or KPIs are a measure of how the company is progressing towards achieving its goals. Organizations use KPIs at multiple levels; there’s an organizational, high level KPI that focuses on the company’s growth and performance. At the same time, individual departments would also have low-level KPIs that help measure their performance and contribute to the overall company’s performance. 

KPIs lets you know what is working for you, and what isn’t, and helps you focus your efforts accordingly. They involve setting up targets, against which the performance is measured, using leading and lagging indicators. 

What are leading and lagging indicators?

Leading indicators are forward looking indicators that lead to lagging indicators. They are about predicting the performance. They let you know what might help with achieving the desired goals. For instance, for high employee retention rates, employee satisfaction is a leading indicator. These are sometimes vague, but absolutely useful in determining the success of goals.

Lagging indicators are backward looking goals, wherein you look back to see what has been achieved. It is output based, which makes it easy to identify and measure. However, they only tell you what has been achieved, and not the attributes that contribute to the lagging indicators (i.e. leading indicators). 

For a successful KPI strategy, you need both leading and lagging indicators. By focussing on the larger picture, you can establish a perfect balance between leading and lagging indicators that can help you track performance and achieve better results. 

What are Outputs and Outcomes?

Outputs let you know how much work was done and what is produced whereas outcomes talk about the greater impact of the goals. For instance, in a social media campaign, output is the engagement rate of the campaign whereas outcome is the increased brand awareness. 

Developing KPIs for your business:

When developing KPIs, keep in mind the outcomes and the long term objectives. Here are a couple of things that can help you set up a KPI plan for your company. 

  • Ensure that your KPI is aligned with your company goals. It needs to drive the business outcome. They have to be an important part of the company’s strategy.

  • Communicate your KPI effectively. Ensure that your employees and all the key stakeholders know why you chose a particular KPI over the rest. Let them know the impact of your KPI on the business goals. Hear them out, listen to their suggestions and let them know where the organisation is headed. 

  • Review your KPI regularly. Track your KPIs on a regular basis. This will let you know whether it was a good idea to choose that KPI.

  • Create an action plan. Set up short term and long term goals. This will help you review your plan at regular intervals, and realign your goals. You can change your track and adjust your KPIs whenever necessary. 


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