Key performance indicators offer goals for teams to strive for, benchmarks to measure advancement, and insights that aid individuals throughout the organization in making better decisions. Key performance indicators support the strategic advancement of every department within the company, from marketing and sales to finance and human resources.

It is essential to develop certain yardsticks to measure growth over differences between standard and actual work from time to time in the organization. Well-described KPIs can help you achieve growth in numerous ways and can help you scale your business while logically implementing decisions based on factors and situation-based problems.

Leaders at mature startups and established businesses both ask, “How do we define our organization’s KPIs?”
This fundamental question, despite its critical importance, is frequently asked without first addressing its two underlying suppositions:

  1. The organization has a well-defined goal in place, and each individual has their own clear goal in mind.
  2. The team in charge of defining KPIs has the same clarity in their work.
The end goal with KPIs

Often, it happens that organizational policies take KPIs for granted. Many times they don’t align with the actual indicators in mind. This should be gravely avoided. The early assumptions that we had indicated that productivity will depend on the clarity of objectives and subsequent work upon them. Here are the most common goals that are fulfilled by KPIs.

Alignment of work and teams: KPIs help you measure the success of projects, performance, or employee satisfaction while reaching organizational goals in the same direction.

Reality Check: These indicators provide you with a reality check on your organization. They tell you what is going on with the overall health of your organization. These take inputs from working risk factors and financial indicators.

Adjustments: KPIs enable you to make your decisions practically. Hence, you will be more inclined towards reality-based decisions rather than thought-based ones. KPIs enable you to adjust whenever required.

Authority-Responsibility bridge: When KPIs are maintained and measured properly, the bridge between authority and responsibility is maintained at a healthy level and accountability comes in automatically.

These four are the end goals with KPIs in every organization. Now you may have separate goals, but overall, these 4 elements are the core offerings that a well-structured KPI provides.

What should you do?

Find your static

We define “static” as the consistency and dependability of the measured results. By extension, this means that results at different times can be accurately compared.

A fixed statistic from which you might want to develop a key performance indicator would be, for instance, the finding that in January and February, 1 out of every 100 individuals who began a trial of your product turned into a customer. So, this will help you formulate many observations that will lead to different discoveries regarding your business and business framework developments.

Ensure the ability to forecast

Although you don’t need to use artificial intelligence to the fullest extent, KPIs must at least somewhat assist you in making predictions. Your figures must be understandable to the extent of

Assume that once you reach a certain Net Promoter Score, the period from trial to customer appears to be significantly shorter. Seeing this correlation may allow you to forecast: increased customer success = decreased time between trial-to-customer.

Depending on what organizational objectives you’ve decided on, building a KPI around this forecast may be worth your time.

The mistakes to avoid

In business processes, mistakes happen. Even the most renowned businesses have trouble avoiding these simple yet critical mistakes. They can occur at various stages of a company’s development, such as when new team leaders are hired, when new goals are set, or when out-of-date KPIs are kept up while an industry goes through a rapid period of change. The most common KPI mistakes are:

  • Reliance on intuition: This occurs usually because founders assume that they know their business and, hence, they will understand what is fundamentally good for their trade. While this may work from time to time, it is not something the founder should trust upon. This can arise from the overconfidence effect and can also ruin many great opportunities. Hence, follow data rather than guts.
  • Blindly adopting commonly held best practices rather than creating your own: Many founders adopt this practice due to FOMO. It can also be caused by a lack of confidence in one’s framework and trying to copy competitors’ moves to beat them in their own game.
  • Bias toward the most recent information learned: Bias happens when you strongly believe something without thinking about in-depth matters. This should be strongly avoided as the founder should go after the results fetched from the data, rather than with one’s belief systems.
  • Confusing lagging indicators (the easy-to-measure output) with leading indicators (the difficult-to-measure input).
Final Words

KPIs are the spinal fluid of the business structure. As a founder, you should make your end goal crystal clear when fixing KPIs.

Operating based on your experience can be good when making certain decisions. But while making practical business decisions, you should always go for your fulfilled KPIs and supporting data.

Hence, keeping the end goal in mind and communicating the same to every unit of your organization will help you to gain productivity and efficiency, and your KPIs will be in place to ensure business success.