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An Intensive Step by Step Guide to Implementing KPIs

written on 20-3-17-Tue 12:52
Home KPI An Intensive Step by Step Guide to Implementing KPIs
Why is Implementing KPIs Important?
7 Step Guide to Implementing KPIs
5 Tips for Implementing KPIs Successfully
Final Thoughts


When key performance indicators or KPIs have been well-implemented, a business is primed for success. Every company has strategic goals that they wish to accomplish in a certain timeframe, and something is needed to tell them if they are on the right track. That is where KPIs come into the picture. However, implementing them is not a straightforward endeavor.

To make sure that KPIs are working for you and not against you, they need to be carefully and methodically implemented. Keep on reading to find out what you need to know about implementing KPIs.

Why is Implementing KPIs Important?

Before we talk about the steps to implementing KPIs, let us highlight their significance in a bit more detail. Many people downplay just how much value KPIs can bring to their company, and that is a big mistake. Here are a few reasons why you should take KPI implementation seriously. 

Basically, they:

Provide a Performance Measure

Doing business is like taking a journey. You have a destination in mind, which is the things that you need to achieve – the goals of the company. But how do you tell if every move you make is bringing you closer to your destination? This can be hard to do if you don't have a way to measure where you are and where you need to be.

In the business sense, a KPI is what measures the performance of the company, helping you ascertain if you are heading towards achieving your goals. That way, you will know whether your performance is on par or subpar. Knowing this is extremely useful, especially when it comes to decision making.

Ensure Each Business Decision Brings You Closer to Your Objectives

By knowing how the business is performing, you are in a better position to make informed decisions. If the business is underperforming after gleaning the necessary insights from measuring the KPIs, then you can take the necessary corrective action. This will ensure that your activities are in line with the company’s goals.

And even if you are performing well, there is always room for improvement. That way, KPIs always keep you on your toes, allowing you to identify more opportunities to deliver more value to your customers. In other words, through the valuable insights KPIs can provide, you can make even more informed decisions to reach your goals much faster by looking at areas that can be improved and taking action.

Motive Employees

Once employees know that performance is being measured through KPIs, they can become more driven to deliver results. No one wants to underperform. And by letting employees know where they have fallen short in regards to meeting targets and helping them understand why, they can become more motivated to succeed.

On the downside, this can lead other employees to think of clever ways to make it seem as if they are performing as expected. This is because they now know the stakes are high and the pressure is on. It is up to management to use KPIs as a tool for employees to feel motivated rather than pressured into delivering results no matter what.

7 Step Guide to Implementing KPIs


There is no doubt that KPIs are extremely useful for every business. But the challenge becomes finding the right KPIs and implementing them to give the company a greater chance of success. Believe it or not, it can be quite easy to make mistakes when it comes to KPI finding and implementation. But by following the seven steps mentioned below, you can be certain that everything goes off without a hitch.

1. Define Your Strategy

You can’t start implementing KPIs if you don't have your company strategy laid out. Your strategy serves as a road map that gives your business direction. And it determines where you want your business to end up in the future. KPIs are like a compass that help keep you on the straight and narrow, which is what makes having a well-defined strategy extremely important.

There are no hard or fast rules on how you can define your strategy. The key thing the strategy needs to do is establish your key priorities and how you wish to achieve them. While some will want to write this down into an official, structured document, others will just make a list of strategic statements.

How ever you wish to define your strategy is up to you, but there are a number of questions that must be answered by the strategy. The most important ones include:

  • Why was the company formed? What is the purpose of the company?
  • What products and services is the company offering to its customers?
  • Who are the company’s customers?
  • What are the company’s strengths and weaknesses?
  • How can the company remain competitive?
  • Why are these strategic decisions important to achieving the company’s goals?

By providing answers to these questions, you will ensure that your business narrows down its priorities. That way, you will ensure that all activities will be geared towards achieving only those things that ensure growth and profitability.

2. Identify Possible KPIs

With your strategy in hand, you will know where your company needs to be. Now it is time to think about the things that you can measure in order to track your progress towards your strategic goals These are what will be your KPIs. At this point, it is worth remembering that you can measure just about everything you can think of, so go crazy with the list.

Don’t worry about being too specific at this point. You just need to list things you would love to measure while also considering your industry-specific and your business needs. And you need to make sure that what you are choosing to measure is directly related to your strategy, especially when it comes to achieving your goals.

For example, if you plan on increasing sales by 20%, you need to think of KPIs that will help you determine how close you are to achieving this goal. KPIs you can measure for this include the following:

  • Daily sales
  • Sales qualified leads (SQLs)
  • Customer lifetime value (CLV)
  • Monthly new leads or sales
  • Conversion rate
  • Cost of customer acquisition

3. Filter Out the Irrelevant KPIs

Now that you have your list of KPIs, it doesn’t mean that you should go ahead and measure everything. In the end, the business will be saddled with so much information that it will be extremely difficult to glean any actionable insights out of it. This means all the time, effort and money put into measuring the KPIs will all be for naught.

This is because decision-makers are people who are usually pressed for time. The last thing they need is to look at data that is unwieldy. This is just extra work that they don’t need because it will require them to figure out which KPIs are the most critical ones. This can delay the decision-making process and decrease the window of relevance in regards to KPIs that need immediate actions.

To figure out which KPIs are irrelevant, you need to use your strategy as a guide. Ask yourself which of the KPIs you have listed can be used to make informed decisions when it comes to the goals you are trying to achieve. If it cannot be used for that purpose, that KPI has got to go. By the end of this exercise, you should only have the relevant ones on your list.

4. Determine How You Will Measure the KPIs

Determining how the KPIs will be measured is another critical step in the implementation of KPIs. You need to come up with a method that will allow you to collect the data needed to measure KPI and see how well the business is performing. This method should be specific to the objective you are trying to achieve, as well as the timeframe you need to achieve it in.

You also need to come up with critical success factors. Once these critical success factors have been met in the allotted time frame, you can consider that objective complete. Don’t just state the factors, make sure they are well-defined so that everyone involved can understand them and agree that they are realistically achievable.

Another thing that needs to be established at this point is the frequency of KPI measurement and reporting. Make sure that the data is being measured and reported at relevant times. Ideally, this should be done at regular intervals or at times when the company will need to use the data.

5. Set Targets

After the measurement methods have been outlined, it is time to set targets. Without targets, your KPIs are essentially useless. You can only measure performance when you have targets to measure them against. Having targets will tell you what is considered to be good and bad performance. This will all be based around the value of each individual target, of course.

This is because once the performance evaluation has been made available to everyone, they will be able to see where they are succeeding or failing. Those who fall short of the desired performance levels can up their game to make sure that they are working towards achieving their targets.

As in the real world, a target provides focus, something to shoot for. This will keep people focused on what they have to do to get the business closer to the objective. Ultimately, everyone will be working towards making the company successful when they know what it is they need to achieve.

6. Communicate the KPIs Within the Company

For people to positively affect the KPIs, they need to be made aware of their existence. Not only that, they also need to know how they are being measured and reported. Make sure they understand what each KPI signifies and how it is related to the strategic plan of the company. Then you can assign ownership of the KPI, making sure that there is an individual or team/department monitoring it and others collecting the necessary data.

There is a lot of data collection involved in measuring KPIs. People want to know that what they are doing has value for the organization they work for. In that sense, communicating the KPIs and making sure that they are understood will determine the levels of motivation and enthusiasm that people show towards achieving their targets.

7. Review the KPIs

Implementing KPIs is not a once-off deal, you also need to review the KPIs from time to time. This will allow you to see if they are actually leading to better decision making. If they aren’t then it is best to discard them and come up with new ones. If you are just measuring KPIs for the sake of measurement, then you are wasting valuable resources on something that will not help your company achieve its goals.

Also, once the goal has been reached, then you need to update that KPI to be inline with the new goals. It is extremely important that your KPIs should also respond to the changes in company trends and performance. So if the current ones have served their purpose, review them and make changes accordingly.

5 Tips for Implementing KPIs Successfully

Knowing how to implement the KPIs is half the battle, there are few extra things you need to do to make sure that implementation is successful. Many people make easily-avoidable mistakes and they end up undermining their efforts to use these great performance measurement tools. So if you want to increase the chances of successfully implementing your KPIs, then keep these five tips in mind.

1. Use SMART Criteria

Since KPIs are all about measuring your performance against your goals, they need to be goal-oriented. This means that when formulating your goals, you need to make sure that they meet what is known as the SMART criteria. SMART means that your goals should be Specific, Measurable, Attainable, Realistic/Reachable and Timely.

If your goals aren’t SMART, it can be extremely difficult to implement KPIs in a manner that helps your company. This is because your goes will be virtually unreachable, rendering all KPIs useless. This can lead to you and others in the company wasting a lot of time and effort with nothing to show for it.

2. Get Executives Involved


When implementing the KPIs, it is a good idea to have executives involved at all levels to make sure everything goes smoothly. This is especially true at the beginning. Since executives are extremely involved in defining the strategy of the company, they need to understand just how important creating SMART goals is to implementing KPIs.

They also need to be involved in the selection process for the KPIs, considering that they are the key decision-makers of the company. Cutting them off after they have created the strategy can weaken the KPIs’ relationship with the overall strategy. In the end, the executives won’t see the connection between the KPIs and the strategy, meaning they might not even factor them into their decision-making process.

Again, this will be a waste of time and effort for everyone involved.

3. Don’t Use the Same Measures Everyone is Using

Measuring the same KPIs that everyone else is measuring is a form of laziness that should be avoided. Don’t just copy and paste the KPIs that your competitors are using, thinking that it will automatically benefit your business. Some might and others might not – you don’t want to find out it is the latter scenario when it is too late.

Just because everyone is tracking specific KPIs, it doesn’t mean that you need to do the same. The ones you select should be specific to your business. They need to reference your strategic plan in order to work for you. That is what your competitors have done with theirs, and they serve their purposes. Find the ones that serve yours.

4. Make Sure Employees are Capable

Implementing KPIs cannot be successful if you don’t have capable people. KPIs are supposed to help the company move closer to its goals. This cannot happen if employees can't execute the actionable insights that have been uncovered by measuring the KPIs. So before you think about implementing the KPIs, make sure you have people who know how to do what needs to be done.

5. Don’t Make Employees Afraid of KPIs

A KPI can’t do its job if it is not assigned to an individual or team/department. They are the ones who are responsible for ensuring that the targets set have been reached. However, this can also create a bit of resentment because they will feel as if they will be penalized if performance falls below expectations. 

It is important to make them understand that KPIs are a tool for uncovering opportunities to make the company perform better. They should not feel as though KPIs are a tool for rooting out people and teams that need to be reprimanded. That way, they will be more enthusiastic about them and take ownership.

Final Thoughts

KPIs are part of any successful business. You would find it had to come out of any strategic business meeting without hearing at least one person mention them. However, implementing KPIs is not something that is as easy as picking a metric and measuring it against performance. By reading this article, you will be armed with the knowledge on how to identify and implement KPIs in your business,


What Does Analyzing a KPI Tell a Company?

It tells a company if they are being effective at achieving their goals. If not, it means management must make informed decisions to ensure the business gets back on track. These decisions will be data-backed since they will be based on the insights provided by measuring the KPIs. 

What is a High-Level KPI?

High-level KPIs are the ones that look at the overall health of the company in terms of performance. Because of this, these KPIs are assigned to interdepartmental teams to make sure that the targets are met. As such, they are commonly referred to as business KPIs. Examples of high-level KPI include revenue growth and operating cash flow.

What is a Low-Level KPI?

Low-level KPIs look at the overall health of a single individual or company in terms of performance. Examples of low-level KPIs include market qualified leads and customer acquisition costs.

Should KPIs Be Incentivized?

While there is nothing inherently wrong with tying incentives to KPIs, it's a tactic that can backfire tremendously. The scenario will play out in the same as when people are under pressure to meet targets. They will find creative ways to manipulate the data to make it look as if they are meeting their target just so they can win the prize. In the end, this will only hurt the company.

Is There a Difference Between a KPI and Metric?

A KPI and metric are terms that are used interchangeably, but they aren’t the same thing. A primary purpose of a metric is to track how a single process within the business is performing. A KPI, on the other hand, measures the performance of the company as a whole to see how effective it is working towards achieving its goals.

What is a KPI Dashboard?

A KPI dashboard is simply a way of organizing your KPIs in one place to see how your company is performing – think of it as an executive summary for your KPIs. The dashboard displays the KPIs side by side, allowing you to see which goals you are making progress towards and how that progress is affecting the other goals. After all, KPIs don’t work independently of each other. 

This makes a KPI dashboard an extremely powerful decision-making tool. And the dashboard can be created using a number of KPI dashboard tools or even in an Excel or Google Sheet.

What is a KPI Report?

A KPI report is a detailed visual representation of all KPIs. It helps your business track progress on the goals that it wants to meet through a combination of charts, graphs and tables. Basically, it tells you everything you need to know about your KPIs so you can use them effectively in decision making and achievement of goals.

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