definition of the term KPI

Key Indicators Performance or KPIs are indicators of a company’s performance. They allow him to position himself in relation to his objectives. This is qualitative data that evolves over time. Discover the KPIs in detail.

KPIs are key performance indicators

Before talking about performance indicators, we should perhaps explain how a company works. Here are some basics to understand the context of KPIs.

Evaluate the achievement of objectives through KPIs

A society must have a global vision that determines the future it wants to have. To turn this dream into reality, she needs to set goals and implement a real strategy. This requires the joint effort of different members of staff, but also of company managers.

KPI performance indicators are used to determine where the company is in relation to its roadmap. Often, objectives are spread over 3 to 5 years, even if they can be set over 18 months in certain very competitive sectors of activity. A company can set itself several goals, in this case increasing turnover and increasing visibility on the Internet.

Measuring a state using variables

KPIs obey a certain number of conditions. They mainly depend on the objectives. The latter must meet SMART criteria, that is to say:

S: Specific, but above all simple so that those concerned can understand them.

M: Measurable with quantitative and qualitative indicators.

A: Achievable with the means available to the company.

A: Realistic so that those who must achieve it find the motivation to take on the challenge.

T: Temporally defined, even if it means setting several levels.

Some examples of KPIs used in business

The KPIs are to be chosen according to the sector of activity of the company. Then, we must also not forget that these key indicators depend above all on the objectives and the strategy implemented. The data can be illustrated in a summary dashboard, histogram or statistical graphs.

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Variables commonly used in e-commerce

In the world of online sales, site traffic figures matter a lot. The KPIs focus on the number of unique visits, then the cost per click. They also consider the time that the Internet user spent on the pages of the e-retailer. This data can be analyzed to make improvements to merchandising, but also to product presentation.

The list of key indicators includes the value of items sold as well as the average basket size per buyer. Consumers can also leave ratings which generally range from 1 to 5 stars. This evaluation may reflect satisfaction with the merchandise, but above all the quality/price ratio.

Measures used in the financial field

On a financial level, the KPIs can give an idea of ​​the profitability of the business model, thanks to the gross profitability rate and the return on assets. Analysts look at the operating cycle of products, the payment time of suppliers. They are particularly interested in data that makes it possible to keep an eye on the solvency of economic partners.

Indicators often relate to payments. Indeed, if funds circulate quickly, this means that the financial department is perfectly managing the company’s affairs. It’s even better if it increases its self-financing capacity. There is also compliance with the forecast cash flow plan.

For project management

The sites also have their own KPIs. In particular, they can illustrate the relationship between planned tasks and those accomplished. The duration of completion constitutes a key indicator dear to work managers. Then there is the accuracy of forecasting material requirements. Indeed, a successful construction company more or less manages to meet the deadline, but also manages not to shatter the initial estimate.

For project owners and site owners, the percentage of achievement in relation to the set objectives is essential at each inspection. They will also be interested in error rates. For good reason, there is a certain margin of tolerance in project management. Finally, indicators on human resources can be noted.