Best practices for defining KPIs

Having defined KPIs is essential to the good performance of a company. KPIs are key performance indicators that tell us what state the business is in and how far (or near) we are from meeting the stated goals. Based on the company’s indicators and performance, managers can make more informed decisions. However, KPIs are only useful if they are defined correctly. In today’s article, we will address the best practices for defining KPIs.

Define measurable indicators

For an indicator to be well defined, it is necessary to measure it easily, that is, you must always opt for quantitative and non-qualitative indicators. In the case of qualitative indicators, there is a high probability of a subjective evaluation. For example, instead of aiming to improve sales, set an indicator on the conversion rate to sales.

Don’t complicate

KPIs should be simple so that the entire team is able to understand them. If you get too complicated a KPI runs the risk of not being able to extract any useful information from your analysis. And if the employees do not understand the indicator can be unmotivated, which harms the whole performance of the company.

Define indicators appropriate to the business reality

Not all indicators are for all companies. There are indicators that fit one type of business, but that do not make any sense in other areas of activity. Defining indicators only to be defined will create harmful noise to employees’ performance and this will have a negative impact on the company’s final results.

Evaluate KPIs frequently

A KPI should be analyzed frequently because only with constant monitoring is it possible to understand whether we are moving in the right direction or not. You should always opt for indicators that can be measured easily and frequently so that you can make day-to-day decisions based on reliable and up-to-date information.

Make the dynamic indicators

An indicator that yesterday was quite important, today may have lost some of its importance. Companies are living and dynamic organisms and as such changes must be monitored in all areas of the company. Evaluate at least every three months whether the indicators that have “assets” are the most appropriate given the period the company is going through.

Defining performance metrics is essential if you are to succeed in your business. Working without knowing which way the business is going is the first step to failure. It is essential that you be aware that defining indicators is a job that deserves your attention and dedication, because only in this way will you be able to involve the entire work team in pursuit of global business objectives!