Key Performance Indicators: Types, Importance and How to Measure it

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 Nov 11, 2022

Key Performance Indicators: Types, Importance and How to Measure it

“What gets measured gets done” is a very popular proverb which is often used in the business world. Experts utilise Key Performance Indicators (KPIs) as their go-to tool as it helps in measuring established goals, gauging performance, and developing plans. It also helps in facilitating decision-making by highlighting key objectives and presenting a framework for future evaluation. KPIs are among several frameworks that help organizations grow in the rice directing. You must first comprehend the meaning and significance of key performance indicators (KPIs) before you can comprehend how to use them.


Business growth isn’t a matter of chance; it’s the outcome of constant organisational objectives and progress. Therefore, firms which are committed to a detailed evaluation of their very own performance are successful ones. KPIs encourage responsibility and ownership throughout all departments and levels while assisting in keeping business objectives at the forefront of all pertinent decisions. Any organization’s growth and performance depend on its KPIs. It’s very crucial to strike a balance between the efforts required to monitor, develop, and publish Key Performance Indicators and the profit they produce. These metrics should be utilised for decision-making than for reporting and collecting necessary data. Choosing, assembling, and defining what and how to measure is another difficult challenge. What type of information is required by the organisation to enhance and comprehend the automation and operations of the network? Some might get overenthusiastic and start measuring and tracking everything that can be measured. KPIs today also require to produce the beneficial baseline measurement system to measure network improvement as many networks are manually operated.

What are Key Performance Indicators?

A key performance indicator is a quantifiable figure that shows how successfully a company is reaching important business goals. KPIs are used by organisations to monitor overall performance in achieving their goals. Key Performance Indicators (KPIs) are also essential (key) quantitative measures of a project’s success. It offers operational and strategic improvement a path, gives decision-making an intellectual foundation and helps focus on what is important.

Using it for management entails setting goals (an ideal performance level) and monitoring development toward those goals.

When utilising KPIs to manage, it’s common to focus on performance improvement utilizing growth figures, which serve as early indicators of upcoming success and will ultimately result in the desired effects seen by trailing measurements.

There are two types of Key Performance Indicators: Internal and External. Internal KPIs are used to measure divisional or departmental goals, but they also create an impact on attaining the company’s mission and objectives. KPIs help in motivating staff members to contribute their best in achieving desired goals. To evaluate divisional and departmental performance in achieving the company’s goals, External KPIs are utilised. Key Performance Indicators vary from firm to firm based on their specific objectives and performance criteria.


There are three important Key Performance Indicators which are beneficial for measuring team performance or business progress:


Financial KPIs: This kind of KPIs outlines the income you want to receive after achieving a specific important result.

Custom KPIs: With this type of KPIs, you may select the appropriate metric and specify how many of that metric you wish to attain.

Task Completion KPIs: Due to the nature of these KPIs, their implementation is wholly dependent on the accomplishment of actions related to the present key result.

Key Performance Indicators are a type of measurement that can determine and assesses the achievement of specific key results. The SMART model is used for determining critical results.

SMART stands for-

SMART stands for

When Key Performance Indicators and the SMART framework are combined will improve your team’s success and business performance.

Importance of Key Performance Indicators

To ensure that you can achieve your business goals, efficient Key Performance Indicators are one of the significant measures. It is crucial to use good KPIs if you want to enhance your company’s performance. The use of KPIs has the following five benefits.

Importance of Key Performance Indicators

To Track Change over Time

Key Performance Indicators is a measurable outcome that helps determine a firm’s performance. Key performance indicators (KPIs) would be any measurable outcomes showing how an organisation accomplishes its goals. Employee productivity, the calibre of the product, customer satisfaction, and the number of employees, the number of locations, gross margin, revenue, and everything else can be considered. Your company’s KPIs are set up every quarter so you can monitor your success. Change your course of action and inform the other departments if your strategies aren’t moving your company in the right direction.

To Track Business Health

KPI serves as an indicator of health insurance for the company. To monitor the vital indicators of your business, you will only need a significant subset. Make sure you only measure the areas that require alterations so you can direct your energy in the right direction. It has been discovered that keeping track of the KPIs in areas like revenue, processes, and employees is essential. These areas are covered by measuring customer satisfaction, business strategies, human resources[1] disciplines, and business processes. Make sure to select an ideal KPI for your business before worrying about who will be responsible for measuring them.

To Make Modifications and Maintain Focus 

Every business organisation should keep track of leading Key Performance Indicators along with its present performance to determine ways to attain its objectives. With this, you can determine whether you are on the right route to accomplishing your goals. You can modify your strategies accordingly. For example, you can opt to prioritise the marketing sector over other sectors like production and finance if you see a decline in sales. Leading performance indicators can be calculated and are also subjected to direct control. It is imperative to have key performance indicators on your dashboard as it helps in maintaining the direction of your projects.

Increases Efficiency In Communication

As we all know that it takes time to communicate, especially in unforeseen or difficult circumstances. In the business world, effective communication is crucial to guaranteeing swift adjustments to change conditions. It helps in increasing communication effectiveness if employees’ mental model is in place. In other words, measuring KPIs can improve output and teamwork and boost morale when every department shares significant knowledge and understanding of goals and objectives along with strategies on how to complete specific tasks.

Makes Managing Finance Much Easier

Key Performance Indicators, along with frequent reporting, helps businesses in avoiding upcoming financial disaster. A business organisation has a good amount of time to react to such cases when they know exactly how much money is constantly flowing in and out of their business. With the Key Performance Indicator tools, any business organisation can easily make frequent adjustments rather than holding up until the end of the year to rectify a problem.

How to Measure Key Performance Indicators?

Countless definitions and types of Key Performance Indicators have been discovered over the year with the help of academic research.

In the year 2010, research offered one shared distinction: there are four major organisationally useful measurement types when combined, can form effective Key Performance Indicators. 

The following should be taken into regard while using Key Performance Indicators (follow in chronological order):

Key performance indicators: How did you do?

Indicators of success: how much have you done?

How should performance indicators be used?

Performance improvement – KPIs reveal actionable information.

These signs can be thought of as an onion. Web analytics is one of the most prevalent and effective monitoring tools for KPIs. Google Analytics can monitor every sizable amount of information, be it sales, website performance, or new subscribers. However, the problem with such objective data is that the metrics we want to track are occasionally intangible or subject to personal interpretation.

Another significant way in which you can measure it is through the presentation. The best way of presenting complex data to your team is through Google Analytics. It becomes a lot easier to grasp complex data if you use visualisations that can provide clear insights and expand your understanding of the measures. Important material can be conveyed far more effectively through visual representations than through a dense presentation with no interactive elements. When working with several Key Performance Indicators, the simplicity of processing and accessing information becomes very crucial.


Key Performance Indicators are metrics that organisations utilise to gauge their success. KPIs are used to assess and monitor how well a business organisation is attaining its objectives. Key Performance Indicators are intricate, but it also shares the same objectives: giving experts the knowledge they need to make decisions that will help the firm achieve its strategic goals. To know more about recruitment terms and different topics related to the same, keep reading Corphr blogs.

Read our Article: 10 Recruitment Strategies for Startups to Achieve Growth by 205%

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