A key performance indicator (KPI) is a measurable value that shows how well a company is progressing toward a specific business goal. Teams use KPIs to track results in areas such as revenue, customer experience, and employee performance.
KPIs vary from firm to firm, are subjective, and depend on the particular goals of each firm.
KPI stands for key performance indicator. You may also see it written as "key performance index," but "key performance indicator" is the standard term.
The acronym KPI and the term metric are often used interchangeably, but all KPIs are metrics, while not all metrics are KPIs. A metric is any measurement, such as website visits or calls answered. A KPI is a metric tied directly to a business goal. Calls answered is a metric. First contact resolution becomes a KPI when a team sets a target for it.
KPIs are divided into three categories
Financial KPIs - These KPIs are focused on elements such as profitability, costs, and sales, among others. Gross profit margin and return on sales are two such examples of profitability.
Customer Experience KPIs - These KPIs measure how happy the customers are with the service and the product. Net promoter score, customer retention rate, customer lifetime value, and client acquisition cost are examples of customer metrics.
Employee KPIs - These track the quality and engagement of employees and other staff. Examples include employee attrition, engagement, and the pay competitiveness ratio.
Which KPIs matter most depends on the business. Common examples include:
In a contact center or BPO, KPIs track how efficiently and how well customers are served. Common ones include:
These KPIs are usually read together. A short handle time looks good until first contact resolution drops. Reviewing call recordings alongside the numbers helps explain what is behind them. Teams running a BPO operation or a cloud contact center often track these KPIs by agent, queue, and channel.
Start with a business goal, then pick the few measures that show progress toward it. A useful KPI is specific, measurable, tied to a target, and reviewed on a fixed schedule. Tracking too many KPIs at once dilutes focus.
1. Measuring Objectives and Performance KPIs help the organization see how well it is performing against the targets it has set, and how far it is from reaching them. For instance, sales teams have a revenue target every quarter, and meeting it keeps the organization running smoothly.
2. Tracking Market Presence and Trends By measuring customer satisfaction and retention, you can see what is working for your brand. This fosters the right practices in your organization and helps reduce churn. It also gives you insights to prepare for changes to come.
3. Improved Supervision KPIs allow higher management to supervise more easily. It is hard to monitor and micro-manage people. Instead, establishing KPIs and working toward them makes the process simpler. It also helps managers learn about their teams so training materials and practices can be shaped accordingly.