What are KPIs?
Simply put, key performance indicators (KPIs) are measurements that track how well organisations are achieving their goals. KPIs vary across industries and departments, but they typically measure financial goals and business outcomes.
KPIs can be as broad or as narrow in scope as you wish. They can measure comprehensive business goals, such as annual sales targets, or they can track the progress of individual departments or employees. If you would like a complete picture of your business’s performance, it is a good idea to analyse both small and large-scale KPIs.
Why should I use KPIs?
Visibility KPIs help illustrate where your organisation is doing well and where it could improve. The right set of KPIs can make it easier to recognise issues, implement solutions, and prioritise team members’ tasks and responsibilities.
Transparency KPIs offer clarity by setting precise, straightforward expectations for departments and individual team members. Sharing departmental and company-wide goals can also help employees feel engaged with the company’s mission and understand how they’re contributing to the organisation’s larger objectives.
Accountability KPIs make it easy for team members to see the results of their efforts and take ownership of their work. It may sound silly, but refreshing a dashboard at the end of the day to see a visual representation of what you’ve accomplished can be deeply satisfying. Conversely, if the results of your work are not what you hoped they’d be, KPIs can help you identify where you’re falling short and track your progress as you improve.
Clear communication Whether you’re communicating internally or externally, KPIs can help make your message as clear and specific as possible. Instead of saying that customers love your company’s new product or that a recent marketing initiative was successful, you could point out that 95% of customers would recommend the product to others or that the marketing campaign increased last month’s sales by 23%. Tracking the right KPIs can make it much easier to share crucial data with stakeholders and customers alike.
Most fall into these broad categories:
- Financial metrics
- Sales figures
- Marketing metrics
- Customer satisfaction
- Production metrics and costs
Which KPIs should I track?
Ultimately, the answer to that question will depend on your company’s needs, but we’re happy to share some resources to help you get started.
If you’re thinking about which KPIs you’d like to measure (or how you might like to set up your dashboards), there are two simple but crucial things to consider:
- What do you want to accomplish?
- Identify the most important issues facing your business.
- What problems are you trying to solve?
- Which aspects of your business do you need more information about?
- How can you accomplish these goals?
- Which pieces of data do you need to measure or track?
- Also, what will progress look like for your team?
Think broadly when you start brainstorming, but also remember that your data sets should be specific and measurable. Otherwise, you won’t be able to track your progress.
For example, if sales are lagging, you do not only want to evaluate sales numbers—you should also consider examining metrics like the impact of marketing efforts, the number of potential customers visiting your website, and customer satisfaction metrics.
What are some commonly tracked KPIs in my industry?
- Education
- Energy
- Finance
- Healthcare
- Hospitality
- Information technology
- Insurance
- Manufacturing
- Marketing
- Telecommunications
Education
In the education field, you need to monitor data relating to students, teachers, administrators, and budgetary concerns. Examples of commonly tracked education KPIs are listed below:
- Enrolment figures
- Attendance rates
- Course completion rates
- Exam results
- Graduation rates
- Number of suspensions
- Student-to-faculty ratio
- Teacher retention rate
- Amount of money spent per student
- Cost of classroom supplies and textbooks
- Transportation, food service, and custodial costs
These KPIs can help school administrators in countless ways. Exam results and attendance and graduation rates can be used to track student progress at all levels, from individual students to entire classes to the student bodies of different schools in one or more districts. These data sets also offer insight into the health of the school as a whole, financially and otherwise.
For example, identifying trends in teacher retention rates and student-to-faculty ratios could illustrate how successfully the school is attracting and retaining talented educators, and analysing labour and supply costs could help leaders recommend money-saving initiatives. Further, administrators might determine whether there are correlations between data sets by comparing metrics such as the amount of money spent per student and the student-to-teacher ratio with exam results and graduation rates. Dashboards are thus an invaluable tool not only because of the information they put at your fingertips but also because of the potential connections they allow you to make between data sets.
Energy
The energy sector is vast and diverse. Whether you need to track trends that occur over time or monitor live production and consumption data to ensure that facilities function at peak efficiency, the following KPIs can help you achieve your goals:
- Energy production numbers
- Energy consumption figures
- Plant availability
- Plant downtime
- Equipment failure rate
- Production costs
- Average outage time
- Customer satisfaction ratings
- Return on investment
- Total shareholder return
It is critical for leaders to be able to answer big-picture industry questions while also zeroing in on specific concerns as they arise. For example, plant managers need to make sure their output will satisfy consumer demand, but they may also need to identify specific pieces of equipment that are experiencing higher-than-average failure rates. With the data sets noted above, plant managers, energy analysts, and decision makers are equipped to answer questions relating to everything from the functionality of individual facilities to consumers’ energy consumption habits.
By studying production and consumption numbers, companies can ensure that they are able to meet customers’ needs. Also, while ROI and shareholder return provide crucial insight into a business’s financial health, it is equally important to track metrics such as production costs, outage times, and plant and equipment failures as this information directly affects efficiency and profitability.
Finance
The financial world can be complex and keeping track of key metrics can sometimes feel overwhelming. However, with the right combination of KPIs, you’ll see a concise but comprehensive picture of your company’s financial health (what constitutes “the right combination of KPIs” will vary depending on your needs, but the list below should help you start brainstorming).
- Net profit
- Net profit margin
- Gross profit
- Gross profit margin
- Current ratio
- Quick ratio
- Working capital
- Debt-to-equity ratio
- Days sales outstanding (DSO) AR turnover
- Days payable outstanding (DPO) AP turnover
- Average revenue per user
- Monthly recurring revenue (MRR)
- Return on equity
- Inventory turnover
- Earnings before interest and taxes (EBIT)
- Economic value added (EVA)
Some financial metrics remain relatively stable on a day-to-day basis and may only be calculated quarterly or annually. Others, however, may fluctuate on a monthly or even weekly basis. For example, if your company makes a big credit sale, your AR numbers will be inflated until you collect payment.
Dashboards are an especially useful solution for financial KPIs because they provide an up-to-date visual reference for evaluating complex—and constantly changing—numbers. With just a quick glance, leaders can assess big-picture financial metrics such as net profit and working capital.
Gaining insight into the company’s assets and liabilities supplies a more complete picture than that offered by revenue numbers alone. However, leaders can also easily view AR, AP, MRR, and other crucial figures, ensuring that they can monitor the company’s short-term financial health as well as its long-term profitability.
Healthcare
Healthcare professionals need to track a wide variety of data, from clinical metrics such as hospital incidents to operational metrics such as patient wait times. Whether you are a healthcare provider or an administrator seeking to improve patient services and business operations, it may be helpful to consider the KPIs below:
- Individual patient’s data and vital signs
- Diagnostic trends
- Patient satisfaction
- Patient wait times
- Physician patient loads
- Lab result turnaround times
- Readmission rates
- Mortality rates
- Bed turnover rates
- Bed occupancy rates
- Average length of stay
- Average cost per discharge
- Hospital incidents
- Medication errors
With this data, healthcare providers, researchers, and hospital administrators can work to improve the quality of care that patients receive by ensuring that resources are allocated appropriately and that any problems are quickly identified.
By analyzing readmission rates, occupancy statistics, hospital incidents, and medication errors, administrators can identify potential problems that patients may face and take steps to prevent them. For example, if it is determined that most hospital readmissions occur because of patients’ failure to follow discharge instructions, the hospital could dedicate more resources and personnel to patient education.
Further, by studying caregivers’ patient loads, patient wait times, and lab turnaround times, leaders can not only ensure patient satisfaction but also gain insight into employee satisfaction and stress levels. If physicians and staff members are overwhelmed, it is more likely that clinical errors will occur and that employee burnout will lead to a high turnover rate. Healthcare KPIs can thus be used to support the health and well-being of patients and providers alike.
Hospitality
In the hospitality industry, you need to monitor financial data and marketing metrics, all while optimising day-to-day operations to ensure customer satisfaction. The KPIs below can help offer insight into profitability, efficiency, and customer satisfaction:
- Total available rooms
- RevPAR (revenue per available room)
- Revenue generation index (RGI)
- GOPPAR (gross operating profit per available room)
- Average daily rate (ADR)
- Occupancy rate
- Cost per occupied room
- Average rate index (ARI)
- Direct revenue ratio (DRR)
- Marketing cost per booking
- Marketing ROI
- Customer satisfaction ratings
Hospitality professionals must constantly adapt to changing industry trends and customer preferences. Some of the KPIs listed above, such as total available rooms and average rate index, can offer a snapshot of daily operations. For instance, comparing occupancy rates with the ARI could help hotel managers determine whether prices could be updated to encourage higher occupancy rates.
Metrics such as occupancy rate, average daily rate, and revenue generation index can illustrate how well a hotel is performing compared to its competitors by shedding light on its market share. Still, others can provide insight into a company’s short and long-term profitability.
For example, you should analyse your direct revenue ratio to determine how many online reservations are booked directly through your website versus through third-party booking websites. The higher your DRR, the better; as a general rule, you should aim to book at least 40% of reservations through your website to avoid the higher costs associated with third-party sites. Further, metrics like marketing cost per booking and marketing ROI can help you determine whether your advertising campaigns are effective or whether changes are needed.
Information technology
IT professionals need to track support tickets, project statuses, server availability, and more. Whether you want to ensure customer satisfaction or improve your team’s operational efficiency, the following KPIs are a good place to get started:
- Number of support tickets
- Average first response time
- Support ticket resolution time
- Server uptime and downtime
- Mean time to repair
- Mean time to recovery
- Mean time between failures
- Projects delivered on time
- Projects delivered on budget
- Customer satisfaction
This data is invaluable for IT professionals regardless of whether they manage internal projects, perform development work for customers, or troubleshoot technical issues for an in-house or customer-facing help desk.
By tracking the life cycle of a support ticket (with the average first response time and support ticket resolution time KPIs), leaders can not only ensure customer satisfaction but also the appropriate allocation of resources. If, for instance, the IT team is overwhelmed with tickets and responses are taking longer than usual, the team may need to hire additional members. Similarly, monitoring server downtime and equipment repair times can offer insight into the team’s performance and help leaders identify any problems that may exist with either personnel or equipment.
It’s critical for leaders to analyse data sets relating to team performance, equipment functionality, and customer satisfaction, and IT dashboards make it easy to manage daily operations while also tracking key metrics over longer periods of time.
Insurance
The insurance field requires you to monitor various metrics concerning profits, expenses, and customer satisfaction. Some frequently tracked insurance KPIs are listed below:
- Average time to settle a claim
- Average cost per claim
- Revenue earned per policyholder
- Average policy size
- Loss ratio
- Expense ratio
- Return on policyholder surplus
- Annual premium equivalent (APE)
- Customer renewal and retention rates
With this information, insurance professionals can analyse their firm’s performance and profitability, along with short and long-term trends in customer and agent activity. For example, by evaluating average claim settlement times, costs, and policy sizes, agents can ensure that their performance is in line with (or, ideally, exceeding) that of their competitors.
By assessing metrics such as revenue earned per policyholder, return on policyholder surplus, loss ratio, and expense ratio, the agency can gauge its profitability, estimate future expenses, and confirm that it is able to cover customers’ claims. Finally, while customer retention rates are crucial for any industry, they are especially critical in the insurance marketplace. It is far more expensive to acquire new customers than to retain existing clients, so agents need to create the best customer experience possible; this will not only encourage customer loyalty but also optimise profits.
Manufacturing
In the manufacturing world, you need to analyse data relating to productivity, quality, and machine availability. The KPIs below can help your team increase efficiency and customer satisfaction while decreasing costs:
- Overall equipment effectiveness (OEE)
- Machine downtime
- Machine setup time
- Changeover time
- Mean time between failures
- Mean time to repair
- Capacity utilisation rate
- Manufacturing cycle time
- First pass yield (FPY)
- Rework level
- Scrap
- Defect rate
- Customer returns
- On-time delivery
Factory managers and other decision-makers need to keep track of overall production numbers, equipment functionality, production costs, and more. Including the KPIs listed above on your dashboard(s) can make analysing these disparate metrics far more manageable.
For instance, metrics such as capacity utilisation rate (which measures actual versus potential output) and manufacturing cycle time provide a big-picture view of a plant’s efficiency and production. Other metrics, such as machine downtime, mean time between failures and mean time to repair, allow leaders to focus on specific aspects of a facility’s efficiency and analyze the performance of maintenance personnel. Machine setup time and changeover time can help leaders estimate the amount of time typically needed to execute planned, routine changes to machinery.
Defective products are an important concern for manufacturing companies for two reasons: first, rework adds unforeseen time and costs to the production process, and second, if customers receive defective products, they will be less likely to carry the company’s goods in the future. By tracking first pass yields, rework levels, and defect rates, managers can ensure the efficiency of their production process and the quality of the goods being shipped to customers.
Marketing
Marketing professionals need to monitor everything from email bounce rates to website traffic to the amount of sales revenue generated by ad campaigns. While companies’ specific needs will vary, the following marketing KPIs are a good place to start:
- Cost per lead
- Customer acquisition cost
- Customer lifetime value (CLV)
- Return on marketing investment
- Marketing-qualified leads (MQLs)
- Sales-qualified leads (SQLs)
- Landing page conversion rate
- Unique website visitors
- Average website session length
- Website bounce rate
- Leads and customer conversions generated by social media channels
- Website traffic generated by social media channels
- Email bounce rate
- Email open rate
- Email click-through rate
- Email unsubscribe rate
- Customer retention
With this data, marketing teams can determine whether their ad campaigns, targeted emails, and social media presence are effective or whether changes may be helpful. By analysing cost per lead, customer lifetime value, and return on marketing investment, leaders can analyse the cost of gaining customers and estimate how much revenue they may make from their efforts. Further, if this data is broken up according to traffic source, marketing teams could gain insight into the best use of their resources.
For example, if a company gets a higher return on investment from customers who respond to social media ads than from customers who respond to email campaigns, they may want to invest less of their budget in emails and increase their social media presence. Website traffic data such as the number of unique visitors, bounce rate, and landing page conversion rate can offer insight into a company’s online presence and, crucially, the number of visitors who become paying customers or take another desired action, such as signing up for an email newsletter. Email metrics also provide critical insight into the number of customers who are receiving, opening, engaging with (by clicking links), or unsubscribing from marketing outreach efforts. By tracking these figures, marketing professionals can focus on creating fruitful, cost-effective campaigns that will help companies reach their sales goals.
Telecommunications
The telecom KPIs below can help you monitor network reliability, analyse operating costs, and ensure that customers are satisfied with your company’s service:
- Subscriber acquisition cost
- Average return per user
- Network operating cost
- Network coverage
- Network utilization and availability
- Equipment or service downtime
- Call setup success rate (CSSR)
- Dropped-call rate (DCR)
- Delay
- Round-trip time
- Packet loss
- Jitter
- Customer satisfaction ratings
- Customer churn rate
The telecommunications field requires engineers and managers to track various pieces of data relating to operating costs and network performance. By evaluating subscriber acquisition costs, the average return earned per user, and customer churn rate, leaders can estimate how many customers they may lose in a given period of time and how much it will cost to replace them. Network utilisation and availability can help the company anticipate usage patterns, enabling them to allocate the resources necessary to meet customers’ needs. Optimising network coverage, utilisation, and equipment functionality is key for customer satisfaction and retention.
Monitoring specific network performance-related KPIs, such as dropped-call rate, round-trip time, packet loss, and jitter, provides invaluable insight into the network’s ability to process calls and send and receive data. This information is critical as it illustrates where the company is meeting or exceeding industry averages. Further, analysing the network’s efficiency and functionality can help the company determine whether any adjustments need to be made. Having all of this information available on one or more dashboards is invaluable for engineers and decision-makers who need to ensure that equipment is functioning properly and resources are allocated appropriately.
Now that you’ve learned more about how KPIs can help you achieve your business goals, take the next step toward becoming the master of your data.
For more information reach out to Emma & our friendly CXIaaS team to chat about the specific needs in your organisation – www.customerscience.com.au