Is there a Way to Calculate KPI Effectively for Your Business?

KPIs or Key performance indicators are metrics a company or individual uses to assess their performance. They help you to assess a company or individual’s efficiency and productivity. 

1. How do I use KPI?

So, I measure KPI’s when I see a downward trend, or want to look and understand more on the growth metrics. But how I do it depends on what I am looking to do actually.

This is because every KPI is linked to a certain business goal. It comes with a set of variables that influence the outcome of that KPI. So like when I see that the variables are working in favor, I know that the KPIs are good. This, in turn, implies that the business goal behind the KPI is reachable.

This is valid in the opposite situation where the variables not in a good state will lead towards non-fulfillment of your business goal.

However, when I see there is non-compliance of the variables, I check why the variables are not following in line. Then, I work on the efficiency of the affected areas and achieve the business goal eventually after fixing the problem.

2. Should you also be using KPI’s?

Now, that you understand how KPIs work it will be easy to generalize that it is not just limited to a business or an individual. For instance, I use KPIs for various activities like production, services, marketing, and consulting.

In easier terms, anybody or any organization that is clear about its goals and targets that it wants to achieve can use KPIs to monitor progress for the same. However, if the target or the end goal is not clear, using KPIs makes no sense at all. 

The Icy Whiz team talked to Kevin Watts, the Founder and President of Raincross, about the role of KPIs in the future to better address the dynamic challenges of modern businesses. Here is what he said:

“Having founded and led Raincross, a digital marketing agency since 2013, I’ve witnessed how KPIs must evolve to keep pace with real-time data, employee engagement, and goal alignment. The shift from static metrics to dynamic, real-time dashboards is essential.

For example, we leverage Google Analytics and AI to track live SEO performance metrics, allowing us to adjust strategies on the fly. This real-time approach enabled one of our clients to improve their organic traffic by 35% within just a few months.

Employee engagement can significantly benefit from real-time KPIs. By implementing transparent dashboards that track individual and team performance in real-time, we saw a 20% increase in productivity at Raincross.

When employees see the immediate impact of their work through these dashboards, it boosts motivation and accountability.

For instance, our use of AI-powered tools to analyze customer interactions and feedback instantly has empowered our team to make data-driven adjustments that enhance client satisfaction.

Aligning goals with real-time data also ensures all parts of the organization move in sync. At Raincross, we use AI and machine learning to predict market trends and adjust our objectives accordingly.

This predictive analytics approach helped us optimize our programmatic advertising campaigns, resulting in a 278% increase in client revenue over a year.

By continuously aligning our KPIs with real-time insights, we ensure every strategy is cohesive and measurable, driving overall business success.”

3. Is it useful for your business?

Given that the achievement of goals is facilitated by the use of KPIs, we can say that with the help of KPIs, we can find the problems in the system and fix them quickly to avoid any delay.

This is possible because there is a real-time performance analysis happening which helps understand the problems and provide appropriate tweaks in the plans or changes in strategies to reach the desired goal.

The efficiency of each step of a process is also determined by the help of it. 

In an interview with the Icy Whiz team, Tom Molnar, Operations Manager at Fit Design, talked about how KPIs will evolve for real-time data analysis in modern businesses. Here is what he said:

“I strongly believe that the role of KPIs will continue to evolve, especially in terms of real-time data analysis, as businesses nowadays are striving to make quick, data-driven decisions.

With the advancements in AI technology, businesses will have access to more real-time data, allowing them to track KPIs more accurately and adjust their strategies accordingly. 

In terms of employee engagement, KPIs will play a key role in keeping employees motivated and aligned with the overall goals of the organization.

By utilizing KPIs to measure individual and team performance, managers can provide timely feedback and recognize employees for their contributions, leading to increased engagement and productivity.

Furthermore, goal alignment will also become increasingly important as businesses face complex challenges that require cross-functional collaboration.

KPIs will help ensure that all teams and departments are working towards the same objectives, leading to better coordination and alignment of efforts.”

4. Problems with KPIs

The analysis of data and the interpretation is what helps us decide the next step in the process. The challenge here according to me is that it requires constant and perpetual monitoring which is very tedious. Also, I can see that for any client’s business this can be an ongoing work with continuous scrutiny will you get high accuracy?

Also, I would like you to understand that this is a perpetual process. So, if I am analyzing the data of a certain period, it implies that I need to spend time on a long-term analysis to gain insight into even a very small indicator.

Another problem that I often see comes along with this is employee dissatisfaction. By setting unrealistic goals, the employees would try to improve the KPIs to achieve them. However, since they are unrealistic they might not be happy when they can not achieve the same also. Even if they do somehow, it means the quality of work has been compromised in the process. 

Tracy Davis, the Founder and CEO of TRAX Analytics, talked to the Icy Whiz team about the evolution of KPIs. Here is an excerpt from the interview:

“As the CEO of TRAX Analytics and having co-founded initiatives like Mind & Social, I’ve had experience in how KPIs can evolve. Real-time data is critical in the janitorial management space.

Through our platform’s integration with IoT devices, we provide immediate insights that empower our clients to make swift decisions. One example is predictive maintenance in restrooms, which reduces downtime and maintenance costs by preemptively addressing issues. 

Employee engagement thrives when KPIs are transparent and tied to real data. At TRAX, we ensure our janitorial staff sees the direct impact of their work through real-time dashboards. This approach not only boosts morale but also accountability.

For instance, a recent case saw a 15% increase in employee performance thanks to visible, data-driven goals.

Goal alignment is optimized with data analytics. By understanding both market trends and internal performance metrics, businesses can sync their strategic objectives.

For instance, data analytics allowed us to tailor our airport services based on peak usage times and customer feedback, resulting in being named one of USA Today’s Top 10 Airport Amenities. This alignment ensures that every layer of the organization is working towards unified, measurable outcomes.”

5. I will tell you about the Categories of KPIs

Some of them I have used as part of my client work, some I haven’t yet. But these categories are what your business should look at when making a KPI evaluation.

5.1. Strategic

These are the high-level KPIs. They do not provide you with a snapshot of activities or the working at the high level, but a very rudimentary level tells you how the company is performing.

These include indicators like profit margin, total company revenue, or return on investment. 

5.2. Operational 

These are what come into play once you analyze the strategic KPIs. I often see them in businesses with logistics, but there are challenges here.

For one, operational KPIs as they have a shorter time frame of consideration like the performance span is of a month or a day and done for different segments or geographies.

These KPIs are worked with by managers usually to fix the processes in the whole system to fix a big problem like maybe why the revenue is falling. 

5.3. Functional 

These are more specific in function, so maybe one set of key performance indicators for the marketing department, one for the finance department, and so on.

They will focus on one aspect within a company and a department, so a finance KPI can be working on the vendors’ accounting information when they are coming on board and similarly, a marketing KPI can be assessing what is the reach of a particular post/email or blog.

5.4. Leading/Lagging

These define what is the nature of the data that one is monitoring, does the data show upward or downward results; or whether it is showing that something is coming up or it has already finished. 

We interviewed Nick Drewe, the Founder and CEO of Wethrift, on this. Here is what he had to say:

“As a seasoned digital marketing strategist and founder of an e-commerce business, I’ve seen firsthand how KPIs evolve to keep pace with the constantly changing business landscape.

With the surge in real-time data, KPIs would increasingly need to capture the immediacy of insights. For instance, at Wethrift.com, we’ve shifted from daily or hourly observation of metrics to real-time monitoring, enabling us to respond instantly to customer behaviors.

In terms of employee engagement and goal alignment, KPIs will have to progress from one-size-fits-all measurements to more personalized, team-specific, or even role-specific indicators.

This is because fostering engagement requires understanding the unique drivers of each individual or team. At Wethrift, we encourage every team to identify and monitor their KPIs that best align with our company goals, promoting a sense of ownership and engagement at the same time.

With AI and machine learning becoming more prevalent, I strongly believe KPIs will evolve to incorporate these technologies, creating predictive KPIs that provide forecasts and proactive alerts on crucial metrics.

This will support companies in staying prepared, rather than simply being reactive.”

6. How do I Calculate KPIs?

I will give you an example of what I can theoretically do when I have a client site that is trying to know if their blog posts are working. They sell products – could be any – and are looking at conversions. This is very simple and interesting.

• The first step I often do is to define my goal. I understand after talking to the client as to what I want to achieve. I find out what is the part of the performance that I want to monitor and choose the aspect that needs analysis that will eventually help me and the organization reach the goal. 
• Now, I choose the metric that will appropriately measure the goal that is desired. 
• The next step involves gathering metric-relevant data. 
• Then, I calculate the KPI. For example, if 100 posts were surveyed and 75 posts received a high engagement rate in the last month, then the reach will be 75% (75 high-reach posts divided by 100 total posts surveyed). 

• I then analyze, track, and monitor the progress at regular fixed intervals, like monthly according to the example above. This is done so that I have a complete picture of the month-on-month progress with the engagement rate at the end of the year.
• So, now when I look at different posts at different times I can identify what content is getting the highest engagement, what is the correct time to post, and what other areas require improvement like what has to be done to get an engagement rate of say 85%. This will give me a clear analysis and hence help me to build a step-by-step solution for your problem. 
•  Communication is the last and among the most important steps of the whole process. Sharing the information with the concerned department, customer, or manager will keep them informed. It will help them make better decisions to ultimately reach their goals more quickly and with better efficiency. 

Sreejita Saha, the Content and Digital Marketing Manager at Mitt Arv, shared her thoughts on the future of KPIs in real-time data analysis in modern businesses. Here is an excerpt from the interview:

“KPIs will continue to evolve to keep up with the dynamic needs of businesses. One key shift will be toward real-time data analysis.

As data becomes more accessible in real-time through sensors, IoT, and cloud computing, KPIs will need to track and analyze performance on an ongoing basis. This could help businesses spot issues and opportunities instantaneously.

Employee engagement will also drive KPI evolution. Businesses will seek KPIs that track how motivated, satisfied, and invested employees are.

This could involve metrics related to feedback, participation, and retention. Engaged employees are likely to perform better and innovate more.

Finally, aligning KPIs with business goals will remain important. But goals will become more specific, measurable, and time-bound. KPIs will need to track progress toward these granular goals on an ongoing basis.

This could involve integrating KPIs directly into goal-setting systems to ensure a closed feedback loop between objectives and results.”

We have completely understood what key performance indicators are, how they work, and how they affect the working of your company or any individual in achieving the targeted goal.

This leads us to now know that the more concise are our KPIs, close to the planned values and with more achievable goals the more beneficial they are. 

Guest Author: Saket Kumar

Last Updated on June 4, 2024 by soubhik