Key Performance Indicators (KPI) In The Workplace (With Examples)

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Every business has goals and objectives that they want to achieve. KPIs are a way to put these down on paper and measure progress toward them. It can also be used to assess employee performance and the performance of the company in general. In short, KPIs are a way to track improvements, changes, and progress toward a goal.

Key Takeaways:

• KPIs are a way to measure performance, both of employees and of departments. It can even be used to measure the progress of the company at large.

• To be effective, KPIs need to be measurable, clear, aimed towards the business goals, communicated effectively, and achievable.

• KPIs can be used to measure different aspects of a company’s performance. For instance, they can be used for tracking operations, profits, employee engagement, and customer satisfaction.

What Is a Key Performance Indicator?

A key performance indicator, often shortened to KPI, is a measurable value in employees’ performance. The idea behind KPIs is that they’re a way to determine if employees are hitting goals and moving the company forward. In order to serve this purpose, KPIs have to have certain attributes. They must be:

• Quantitative. In order for a KPI to have meaning, it has to be measurable. Otherwise, it’s going to be impossible to determine if the goals are even being met in the first place or if striving toward the KPI is having any results.

• Easy to understand. For the same reason, they have to be measurable, and they can’t be obscure. The management and rank-and-file employees have to understand what it is they’re supposed to work towards in order to be able to achieve it.

• Instrumental in achieving the business’s goals. A KPI that isn’t relevant to what your business is doing isn’t a very good indicator. Your staff may be able to achieve it, but will that help to move your company forward? If the answer is no or I’m not sure, then it’s not a good KPI for your business.

• Known throughout the organization. Having measurable, clear, and achievable KPIs is excellent – but it won’t accomplish much if your employees aren’t aware of them. If no one knows what the KPIs are, then they won’t be able to prioritize meeting them.

• Achievable. If people are given KPIs that are impossible to meet, then it’s not only going to be a bad indicator of performance, it’ll likely lower morale. If every goal is obviously out of reach, then the employees are going to either think that the management is ignorant of how things work or feel as if they’re set up to fail.

Examples of Key Performance Indicators in the Workplace

As with most metrics, KPIs can fit into several different categories. This is going to depend on what your business is and what goals you choose to prioritize. Not every KPI is going to be relevant to every type of business, but many have the ability to cross over. Here are some examples of KPIs.

• Financial. This metric is going to measure how well you are doing in terms of profitability and budgeting. KPIs in this category include:

  • Revenue. It’s a good idea to measure your revenue. Is it hitting the expected numbers? If it isn’t, why not?

    • Is it costly? Is what you’re producing too expensive? If so, you may need to raise prices. Or try to supply parts more cheaply.

    • Is it profits? This can also tie into costs – if the item you’re selling is too expensive to produce, you may not make much profit. But it can also be a matter of not selling enough of them or having to sell too many of them at a discount.

    • Is it efficiency? Is whatever you’re doing taking too long? Salaries are expensive, especially if what you’re doing is taking more labor than expected. It can also be a matter of taking too long and therefore losing customers due to frustration.

  • Budget. Making sure that you stay within budget is another measurement. It’s possible to look at different departments and see if they go over budget, how often, and for what reason.

    • Going over deadlines. This is a way to go over budget quickly. Budgets are set to only include the salaries for the amount of time the project is expected to take. It likely also means there was an issue, and that might take more money to correct.

    • Needing extra equipment. If the company didn’t have the proper equipment or needed to replace some, that could be a financial setback. It may be a one-time expense, but if it isn’t, then it’s something that needs to be corrected.

    • Having setbacks. Hitting roadblocks can cause a project to quickly be over budget and behind schedule. The nature of the problems can be unexpected, at which point it’s hard to prepare for them.

      But if they weren’t, then there may need to be some alterations in future planning.

  • Sales. This is a major part of profits. But there are several different aspects of sales.

    • Number. How many items or services you’re selling can be a big indicator. If one product is selling better than another, it may be time to look into why – or scale back on the less profitable one.

    • Price. Are you making a profit with what you sell? If it’s a service or product that has a variable price, how many do you sell at each price? Is it better to make the pricing more consistent?

    • Repeat customers. Do customers come back to buy from you again? If so, do they tend to return to certain employees and not others? If you aren’t getting repeat customers, then it’s time to look into why.

• Operations. Measuring day-to-day operations can help you see how well employees are performing and how effective company directives and policies are. Examples of metrics for operations includes:

  • Meeting deadlines. If teams are repeatedly failing to meet deadlines, then there’s an issue. The cause can vary and should be determined by comparing their performance against other teams, determining shortfalls, and reviewing the expected timeline to make sure it’s achievable.

  • Number of defects. This is especially important in manufacturing. The number of defective products is a measure of attention to detail, materials, and general efficiency. Changes in this number, good or bad, should be looked at for an explanation.

  • Customer support tickets. If your business is in customer service or in selling products to the public, it’s a good idea to keep track of your support system. You can review the number of tickets, whether the issue gets resolved, and, if so, how quickly.

  • Efficiency. While meeting deadlines is a part of this, efficiency is a broad metric. Depending on your business, there will be different metrics for it. In manufacturing, it may be how many products are made per day.

    It could also be how many hours are required to complete a project or how cost-effective building something was.

• Customer service. Every business has customers, even if those customers are other businesses. In order to be successful, you’re going to have to have, if not repeat customers, then at least ones who recommend your services to others. Some metrics to consider are:

  • Number of customers. Generally speaking, the more customers, the better. However, you should also take into account your customer support staff and whether or not you have the personnel to deal with a certain number of customers.

  • Customer retention. How many customers do you have on average? Is it going up or down? If it’s the latter, you may have a problem with customer attrition. As a rule, the loss of customers isn’t a good sign and should be analyzed and rectified.

    Some businesses use this metric differently, however, as the cost of acquiring a new customer is less than keeping an existing one. So, if they lose a customer but then gain one, it’s not considered a loss – perhaps even a gain. For many businesses, however, this isn’t the case.

  • New customer acquisition. Getting new customers is considered a plus as it adds to your number of customers and, hopefully, profits. However, you should also consider the cost of acquiring new customers. This can be advertising and marketing, or it can be the process of wooing clients.

• Personnel. Taking care of your employees is another important metric. It isn’t just a matter of how well they perform but whether or not they choose to remain with the company. Hiring and training are expensive, making employee retention important.

  • Turnover. If you have high employee turnover, that can be expensive. Not only do you lose the knowledge of the employee who left, but you need to train their replacement. In some industries, such as sales, these employees will also have a rapport with clients, and they may not be thrilled to start over with someone new.

  • Satisfaction. How satisfied your employees are can affect their performance. Unfortunately, this is something that’s very difficult to measure quantitatively, making it difficult to set as a KPI.

    There are some ways around this, such as trying to hit a certain number on a survey, but it can be hard to be sure of the accuracy.

    However, in the ways we’ve been able to measure it, more satisfied employees have a lower turnover rate, better productivity, and are more committed to the company they work for. That means that aiming for this has multiple benefits.

  • Promotions. How many employees you promote versus the ones you hire from outside is another metric to consider. It can indicate a couple of different issues if the ratio is really skewed. If you’re hiring outside people all the time, it can mean your employees are underperforming, and none look good for promotion.

    However, if it’s something your business does consistently, employees can get the feeling that there’s no room for advancement at your company. In that case, you’re likely to see a much higher turnover. There needs to be a balance between promotions and bringing in new talent.

Key Performance Indicators (KPI) for Employees and Examples in the Workplace FAQ

1. How do I create key performance indicators?

   The first thing you need to do to create KPIs is to determine what your business’s main goals are. Once you do that, you break them down into measurable increments and set them as goals for your employees and departments.

2. Why have key performance indicators?

   Key performance indicators can help track improvements and keep up with changes. Having KPIs can help you with assessment, knowing what you need to change to stay competitive, and having a general metric to compare your performance.

Author

Di Doherty

Di has been a writer for more than half her life. Most of her writing so far has been fiction, and she’s gotten short stories published in online magazines Kzine and Silver Blade, as well as a flash fiction piece in the Bookends review. Di graduated from Mary Baldwin College (now University) with a degree in Psychology and Sociology.