An Introduction to Key Performance Indicators (KPIs)

By Vistage Editor

According to Investopedia, ‘Key Performance Indicators,’ or KPIs, are a “set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their strategic and operational goals.”

Because they’re meant to track specific goals, KPIs will, of course, vary between companies and industries.

“A company must establish its strategic and operational goals and then choose the KPIs which best reflect those goals. For example, if a software company’s goal is to have the fastest growth in its industry, its main performance indicator may be the measure of revenue growth year-on-year.”

In some industries, such as the retail sector, KPIs are sometimes industry-wide standards, such as “same store sales.”

Below, you’ll find a sample form of tracking KPIs, and, beneath that, a list of leading KPIs.

KPI Sample Form

On the sample form, for each category, the “Orig. Plan” row is meant to provide the estimated figure for each month of the year and/or the cumulative amount through that particular month of the year, prior to or at the start of the calendar/fiscal year.

The “Rvsd. Plan” row is for providing a revised plan number estimate at the end of each month for the remaining months of the year, based on new information acquired as the year progresses. The “Actual” row is for providing the actual month-end results, and, lastly, the “Variance” row is for providing the difference between the “Plan” and “Actual” figures for each month.

The first five categories in the Sample Form’s left-hand column are commonly used by most managers; the remaining four categories are for a manager to label and use for what best fits his or her business. Ideally, one or two of the categories should be for “leading indicators” (i.e., items that can be tracked that will eventually lead to revenue and net profit).

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Examples of KPIs (Tip: Try to focus on LEADING vs. LAGGING KPIs):

  • Sales per employee
  • Sales per dollar of salary
  • Inbound calls and conversion rate on inbound calls
  • Sales per foot traffic
  • Number of sales per day
  • Average sale
  • Number of pounds shipped
  • Order backlog
  • Work in progress
  • Number of bids submitted versus number of bids converted
  • Accounts receivable
  • Cash flow
  • Customer satisfaction
  • Dollars per rep
  • Employee turnover
  • Employee morale
  • Expenses  <  X percent
  • Gross margins
  • Gross profit per day
  • Inventories
  • Staff turnover
  • Profit to sales
  • Forward sales (orders held)
  • Sales per employee
  • Sales per salesperson
  • Largest item of expense to sales
  • Percent of certain sales to the total (dominant product, dominant customer/type, dominant distribution channel, emerging segment [Internet])
  • Occupancy ratios
  • Machine loading ratios
  • Number of franchise openings to budget
  • Membership numbers to budget
  • Gross contribution of new or special segment / division to budget
  • Cash reserves by burn rate in months
  • Number of capital items sold
  • Average sale value
  • Cost per person hour
  • Ratio of in-house labor to outsourced labor
  • Discard or waste ratio
  • Stock holding to budget or in weeks of production
  • CEO coverage of top customers
  • Number of days to produce accounts
  • Ratio of billable to paid hours
  • Invoice fill rate versus standard (95 percent)
  • Machine up-time versus benchmark
  • Number of complaints
  • Monthly sales or trailing twelve months sales
  • Accounts receivable
  • Net cash flow
  • Customer satisfaction (time, price)
  • Marketshare
  • Customer acquisition
  • Number of active customers
  • Dollars per rep
  • Expenses <  percent
  • Gross Margins percentage
  • Gross profit per day
  • Inventory
  • Labor costs to sales
  • New orders booked
  • Monthly overhead
  • Quarterly profit
  • Sales to plan
  • Sales to prior year
  • Unit sales
  • Book-to-bill ratio (new bookings to billed out orders [shipped])
  • 10-week booking average
  • Income per employee
  • 12-month rolling return on assets
  • Month-end inventory
  • Backlog
  • New accounts
  • New stores opened
  • Same store sales (year to year)
  • Number of active customers
  • Dollar value, volume of quotes
  • Percentage of success on bids
  • Labor as percentage of product cost
  • Write-downs
  • Working capital: Dollars and ratios
  • Line of credit drawn
  • A/R over 60 days and average days
  • New product ideas last month
  • Overseas orders last month
  • Revenue per inquiry
  • R&D as percentage of sales from new products
  • New product introductions vs. competitors
  • Time to develop new generation of products
  • Average time to market
  • Quality measures
  • Process cost (per run, per unit)
  • Order ship cycle times
  • Days supply of finished inventory
  • Training as percent of sales
  • Customer retention percentage

Originally published: Feb 10, 2012

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