The Anatomy of a KPI

Identifying Key Performance Indicators are so vital, we felt it necessary to add one more article to help you keep pace throughout the year. KPIs are the end results that your business needs to progress it closer to what you have deemed as “success”. These are the indicators you should be looking toward to actualize your business goals.

How many KPIs should you set? Aim for 5 - 7 for each plan, whether you are setting annual KPIs or launching a new campaign.

As you set your KPIs, you should be sure to include 5 specific sections within it - (Quantifiable Target + Time Frame to Achieve) + (Data Source + Reporting Frequency + Owner).

Quantifiable Target - Ask yourself, “what is my desired outcome?” Are you looking to increase the number of retail stores opened, increase number of customers or contracts signed, or looking to increase penetration in existing markets? Add a value so you know what you are striving for. An example would be “500 new customers…).

Time Frame to Achieve - Ask yourself, "how long should it take for us to realistically achieve this?” Understanding past performance metrics will help you here. If you have only made 14 sales in 2 years, either you need to shake things up immensely or give yourself a reasonable challenge to achieve. To further the example from above “500 new customers + by end of 2Q2021)”.

Data Source - Ask yourself, “where would we receive the data to help track this?” Knowing which systems will help you track your progress will be helpful to call out early so you can set up your measuring system if it is not already complete. Adding on to our example - “(500 new customers + by end of 2Q2021) + (CRM Systems…)”.

Reporting Frequency - Ask yourself, “how often should we track our progress in achieving this metric?” Measurement tracking is one of the most important pieces of a KPI because, in essence, it tells you how you are performing. You can complete reporting as often as daily, however, this may be too cumbersome for most KPIs. We suggest at minimum monthly tracking to give yourself a holistic view of your progress and still give you enough time to make quick pivots for any gap fills. To continue to fill in our example - “(500 new customers + by end of 2Q2021) + (CRM Systems + Monthly Reporting…)”.

Owner - Ask yourself, “which team is responsible for producing this metric?” This is an optional component, but one that helps clearly identify who the owner of the KPI would be within your hierarchical structure. This is helpful for larger organizations to help keep everyone clear and accountable. The final piece to our sample equation - “(500 new customers + by end of 2Q2021) + (CRM Systems + Monthly Reporting + VP of Sales).

Now you have a full view of how to build a KPI. The sample equation we have built along this article with you showcases both the what and the how of this single KPI. Again, to break it down even further, below we have both the equation and the full business context of the KPI.

In Equation Form: 500 new customers + by end of 2Q2021 + CRM Systems + Monthly Reporting + VP of Sales

In Written Form: As Company X, our first KPI is to secure 500 new customers by the end of Q2 2021. We will track our sales progression in our CRM systems with monthly reporting and regular read outs by the VP of Sales.

As you write your business KPIs, remember to include both the what and the how for each individual KPI. Each KPI’s what components, the quantifiable target and the time frame to achieve, should be clear and should be able to stand on their own as a complete statement that your teams can get behind. The remaining components are to help explain how you plan to track the information as you strive to achieve your set KPI. Now that you have the equation of building a proper KPI, write your own for your business and remember that 5-7 KPIs is the optimal range for every business.