KPI stands for Key Performance Indicators that are a set of calculable measurements used to evaluate the overall long-term performance of an organization. KPI helps an organization to measure its financial, strategic, and operational achievements, especially compared to other businesses in the same industry.
Hence, we can say that KPI is the tool that measures the success of a company versus the set of objectives, targets, etc. KPI varies from organizations and between industries, based on the performance criteria.
There are different types of KPIs used for performance review and measuring organizational goals and success. Strong and effective plans use 5-7 KPIs to manage and keep a track of the progress of the plan. The analysis of a well-structured KPI consists of the following elements.
A target – There should be a target in every KPI. That must match the measure and the pre-decided time of the goal. Target is generally expressed in numeric values that organizations aim to achieve. A measure – There is a measure in every KPI, and the best KPIs contain the more expressive measures. A data source – It is essential to have a clear and well-defined data source in every KPI so that there is no grey zone in how each is being evaluated and tracked. Reporting frequency – There are different reporting rules for various KPIs but, the best way is to present a report every month.
Now that we have an idea about the anatomy of KPIs, let’s have a look at different types of KPIs.
Revenue Per Client (RPC) Revenue Per Client is the most common and easiest way of tracking KPI and measuring productivity. This can be done through a simple calculation, i.e., annual revenue divided by the number of clients.
Client Retention Rate (CRR) Retention is important for long-term profit. It is the percentage of clients that an organization retains for a long period. It is the most crucial KPI among all because it shows how well a company is delivering the brand promise to clients.
Profit Margin (PM) Profit margin is the profitability ratio that evaluates the degree to which a business or company’s activities make money. It shows the percentage of sales that have turned into profits. Profit margin is calculated by using the formula: [(sales – total expenses) ÷ revenue ] X 100
Reviewing employees performance Employee performance review is another major source for tracking KPI. It becomes easy to evaluate the organization’s productivity when it has well-structured data of employees’ performance and engagement. Management can assess and review the performance of every employee and take steps of improvement if required. In this way, it becomes hassle-free to manage organizational success internally.
This can be achieved by using employee productivity management software. These employee management applications offer a plethora of benefits and features. Such as – goal and strategy alignment, creating, assigning, managing, and reviewing tasks, team engagement and collaboration, everyday insights contextual to goals, improve performance with personalized career growth recommendations, and so on.
entomo is a modern performance management software designed for the ‘future of work.’ Powering 30mn+ users, entomo enables ‘enterprises of tomorrow’ to drive performance by aligning goals and nudging actionable insights to manage distributed & remote teams and build a tomorrow-ready workforce. To know more, visit https://entomo.co/request-demo/