What is a KPI or performance indicator?

Key Performance Indicators (KPIs) are essential to measure the performance and success of your business. In this article, learn how to identify, track, and analyze KPIs to improve your decision-making and strategies.

What is a KPI?

KPIs, or Key Performance Indicators, are measurable values that demonstrate the effectiveness with which a company achieves its main objectives. KPIs vary by sector and specific objectives, but they are essential for assessing short- and long-term success.

Why are KPIs important?

KPIs provide a clear view of your company’s performance. They help you to :

  • Measure progress towards your objectives.
  • Make informed decisions based on data.
  • Identify trends to anticipate future needs.
  • Improve performance by focusing on what matters.

How do you choose the right KPIs?

Identify your strategic objectives

Before choosing your KPIs, clarify your strategic objectives. What do you want to achieve? Increase sales, improve customer satisfaction, grow market share?

Linking KPIs to objectives

Select KPIs that are directly linked to your objectives. For example, if your objective is to increase sales, a relevant KPI could be the sales conversion rate.

Make sure the KPIs are relevant

Choose KPIs that are measurable, accessible and relevant. Each KPI should provide you with actionable insights.

KPI categories

Financial KPIs

These indicators measure financial performance, such as sales, net profit or return on investment (ROI).

Customer satisfaction KPIs

These measure customer satisfaction and loyalty, for example through the Net Promoter Score (NPS) or the customer retention rate.

Operational KPIs

These KPIs monitor the efficiency of day-to-day operations, such as customer service response time or production error rate.

Mistakes to avoid

  • Don’t overload with indicators: Too many KPIs can dilute your attention and efforts.
  • Ignoring the evolution of KPIs: Business objectives evolve, and your KPIs need to adapt accordingly.
  • Neglecting data analysis: Collecting data without analysing it is pointless. KPI analysis must lead to concrete action.

What are examples of KPIs?

A KPI, or Key Performance Indicator, is a quantifiable measure used to evaluate the success of a company, department or specific project in relation to predefined objectives. These indicators enable companies to monitor their progress and adjust their strategies to achieve their objectives.

Here is an example to illustrate:

Example of a KPI: Conversion rate

Definition: The conversion rate is a KPI commonly used in digital marketing and e-commerce. It measures the percentage of visitors to a website who carry out a desired action. This action could be buying a product, subscribing to a newsletter, downloading a document, or any other key action that contributes to business objectives.

Calculation formula: To calculate the conversion rate, you divide the number of conversions by the total number of visitors during a given period, then multiply the result by 100 to obtain a percentage.

Why is it important? The conversion rate helps companies to understand how effective their website and marketing campaigns are in converting visitors into customers or qualified leads. A high conversion rate indicates that the website is performing well and that marketing efforts are effective. Conversely, a low conversion rate may indicate problems with the user experience, product offering or marketing communications, requiring strategic adjustments.

By monitoring and analysing the conversion rate, a company can identify opportunities for improvement, optimise the user experience, and increase the effectiveness of its marketing campaigns to achieve its business objectives.

What are the 4 types of metrics?

In performance management and monitoring, metrics can be classified into several types, each used to evaluate different aspects of a business or project.

Here are four types of key indicators that are often used:

Financial Performance Indicators

These indicators measure the financial health of an organisation. They are essential for assessing profitability, operational efficiency and long-term viability. Examples include

  • Turnover
  • Profit margin
  • Return on investment (ROI)
  • Liquidity ratio

Customer Performance Indicators

These indicators measure customer satisfaction and loyalty, as well as the company’s performance from the customer’s point of view. They are crucial to understanding how customers perceive the offering and service. For example

  • Customer satisfaction rate
  • Net Promoter Score (NPS)
  • Customer retention rate
  • Customer service response time

Operational Performance Indicators

These measure the effectiveness and efficiency of operational processes. These indicators help to identify areas for improvement in day-to-day operations in order to increase productivity and reduce costs. Examples include

  • Production defect rate
  • Project completion times
  • Production capacity
  • Efficiency of production processes

Strategic Performance Indicators

These indicators track progress towards the company’s long-term strategic objectives. They are often linked to the organisation’s vision and mission. Examples include

  • Market share
  • Annual growth
  • Geographic expansion
  • New product launches

Each of these indicators offers valuable insight into different aspects of the business, and together they provide a comprehensive overview of its performance. It is important for organisations to select the most relevant indicators for their specific objectives and to monitor them regularly to ensure long-term success.

How is a KPI calculated?

The calculation of a KPI (Key Performance Indicator) depends specifically on the indicator you wish to measure. Each KPI has its own formula and is based on data specific to the objective it aims to assess. Nevertheless, the general approach to calculating a KPI involves several key steps:

Definition of Objectives

Before any calculation, it is crucial to clearly define what you are trying to measure and why. This determines which KPI is relevant to your situation. For example, if you want to measure sales performance, KPIs such as conversion rate or monthly turnover may be relevant.

Data collection

Gather the data needed to calculate your KPI. This may involve collecting financial, operational, sales, marketing and other data, depending on the indicator.

Apply the formula

Apply the specific formula to the chosen KPI. Here are some examples of formulas for common KPIs:

  • Conversion rate: (Number of conversions/Total number of visitors)×100(Number of conversions/Total number of visitors)×100
  • Turnover: Sum of revenues generated by sales.
  • Return on Investment (ROI): (Gain on investment-Couˆt on investment)/Cost on investment(Gain on investment-Couˆt on investment)/Cost on investment × 100

Analysis and Interpretation

Once the KPI has been calculated, analyse the result to understand what it means in relation to your objectives. For example, an increasing conversion rate may indicate increased marketing effectiveness.

Tracking over time

KPIs are not one-off measures but should be tracked over time to assess the trend and effectiveness of the strategies put in place.

Calculation example

If you have an e-commerce site and you want to calculate the conversion rate for last month, when you had 15,000 visitors and 300 sales, the calculation would be :

This means that in the month in question, 2% of site visitors made a purchase.

It is important to note that the choice of KPIs, their calculation and interpretation must be adapted to the specific characteristics of your organisation and aligned with its strategic objectives.

What are the 2 types of KPI?

KPIs (Key Performance Indicators) can be classified in different ways depending on their application or objective. However, a fundamental distinction is often made between two broad categories:

Lagging KPIs (Result Indicators)

  • Lagging KPIs measure past performance. They provide information on the results obtained, which makes it possible to assess the effectiveness of the strategies and actions implemented. These indicators are easy to measure but difficult to improve or influence directly, because they reflect what has already happened.
  • Examples: sales, net profit, customer retention rate, etc.

Leading KPIs

  • The purpose of leading indicators is to predict future performance and indicate the probability of achieving set objectives. They are used to anticipate and influence results before they occur, enabling strategies to be adjusted along the way.
  • Examples: level of employee satisfaction (as an indicator of future productivity), volume of web traffic (as a predictor of online sales), number of new qualified leads (as an indicator of future sales), etc.

The combination of these two types of KPI is essential for balanced and proactive performance management. Outcome KPIs help you understand where you are in relation to your objectives, while precursor KPIs tell you where you are likely to go and how to adjust your trajectory to reach your targets. Using both types of KPI enables companies not only to assess their past performance but also to plan and optimise their future actions.

Read aslo: The SMART method 

What are sales KPIs?

Sales KPIs (Key Performance Indicators) are key indicators used to measure the performance of a company’s sales and marketing activities. These indicators help companies to assess the effectiveness of their sales strategies, monitor progress towards revenue targets, and identify areas for improvement.

Here are some of the most commonly used commercial KPIs:


Revenue generated by sales of products or services. This is one of the most direct indicators of sales performance.

Sales conversion rate

Percentage of prospects or leads that turn into paying customers. This KPI is crucial for assessing the effectiveness of the sales process.

Average order value (Average basket)

Average revenue generated per sales transaction. This helps to understand the value of customer purchases.

Customer Acquisition Cost (CAC)

Total cost of sales and marketing required to acquire a new customer. This KPI is essential for assessing the efficiency of marketing and sales expenditure.

Sales cycle time

Time taken to convert a lead into a customer. This KPI helps to understand the speed and efficiency of the sales process.

Customer retention rate

Percentage of customers who remain loyal to the company over a given period. A high rate indicates good customer satisfaction and loyalty.

Monthly recurring revenue (MRR) or annual recurring revenue (ARR)

Revenue generated regularly each month or year, particularly relevant for subscription-based business models.

Customer attrition rate (or churn rate)

Percentage of customers lost over a given period. A low churn rate indicates good customer retention.

Sales representative effectiveness

Salesperson performance based on various criteria, such as sales generated, number of sales closed or number of new customers acquired.

Market share

Percentage of the total market controlled by the company, reflecting its competitiveness in its sector.

These business KPIs provide valuable information for strategic decision-making, resource allocation and future planning. They are essential for any manager or sales team aiming to optimise sales performance and increase company growth.

What are the 3 main KPIs for assessing your team’s performance?

The main KPIs (Key Performance Indicators) for assessing a team’s performance depend on the industry, the team’s specific objectives, and the aspects of the work you wish to measure. However, three KPIs are widely recognised as being useful across a range of business contexts for assessing team effectiveness and productivity:

Team productivity

  • Definition: Measures team performance in relation to resources invested, such as time and costs.
  • How to measure it: This can be calculated by dividing total output (for example, the number of units produced, sales achieved, or support tickets resolved) by the total number of hours worked.
  • Why it’s important: It helps to understand whether the team is using its time and resources effectively to achieve its objectives.

Quality of work

  • Definition: Assesses the level of quality of the team’s results, taking into account company or industry standards.
  • How to measure it: Can be assessed through production defect rates, customer feedback, or customer satisfaction ratings.
  • Why it’s important: High quality of work indicates not only operational efficiency but also high customer satisfaction, which is crucial to the company’s reputation and long-term competitiveness.

Team commitment

  • Definition: Measures the level of involvement, motivation, and satisfaction of team members in their work and the organisation.
  • How to measure it: Can be assessed through employee engagement surveys, turnover rates, or the number of improvement initiatives proposed by employees.
  • Why it’s important: Employee engagement is directly linked to their productivity, the quality of their work, and their ability to innovate. Engaged employees are more likely to stay with the company, reduce turnover and improve the working atmosphere.

These KPIs provide a comprehensive overview of a team’s performance, covering aspects of productivity, quality and engagement. They help managers identify areas of excellence as well as opportunities for improvement to support employees’ personal growth and the team’s success.

What is the performance triangle?

The Performance Triangle, also known as the Quality, Cost and Delivery (QCD) Triangle, is a model that illustrates the relationship between three key performance criteria for a project, product or service: Quality, Cost and Delivery. This model helps companies to balance these three elements in order to achieve optimum performance in the management of projects or the production of goods and services. Here is a brief description of each vertex of the triangle:

  • Quality: Refers to compliance with specifications, customer expectations and industry standards. Quality is crucial to satisfying customers and building a company’s reputation.
  • Cost: Represents the expenditure involved in producing, operating and delivering a product or service. Managing costs effectively is essential to a company’s profitability and competitiveness.
  • Deadline: Refers to the time taken to develop and deliver a product or service. Meeting deadlines is crucial to meeting customer expectations and maintaining loyalty.

The challenge lies in the fact that these three elements are often in tension. For example, improving the quality of a product can lead to higher costs or longer lead times. Conversely, reducing costs can affect quality or require shorter deadlines, putting pressure on project teams.

The performance triangle provides a framework for making strategic and operational decisions. By balancing these three aspects according to the specific objectives and constraints of the project. It encourages companies to seek an optimum compromise between quality, cost and delivery times to meet customer needs while preserving their margins and reputation in the market.

What is the most important KPI?

The most important KPI (Key Performance Indicator) varies according to the industry, the company’s specific objectives, and the stage the company is at in its life cycle. However, if we had to highlight one that cuts across almost all considerations and contexts, it would be Return on Investment (ROI).

Why is ROI often considered the most important KPI?

  • Universality: ROI can be applied to almost any type of investment, whether in marketing, research and development, the acquisition of new technologies or human capital.
  • Measurability: It provides a clear, quantitative measure of performance, enabling the effectiveness of different investments or strategies to be compared.
  • Profitability: ROI helps companies understand whether the resources invested are generating sufficient added value, which is fundamental to the company’s long-term sustainability and growth.
  • Strategic decision: This KPI informs strategic decisions by identifying the most profitable areas in which to allocate more resources and, conversely, under-performing areas to improve or abandon.

Context and Flexibility

It’s crucial to note that while ROI is extremely valuable. It should not be the only KPI guiding all decisions. Other indicators, such as customer satisfaction, retention rate, or market share. can be just as critical in assessing the overall health and long-term direction of a business. The choice of KPIs should reflect a balance between immediate financial objectives and long-term growth strategies, taking into account customer satisfaction and sustainable development.

The key is to identify the KPIs that are most aligned with your company’s strategic objectives and use them in a balanced way to guide your decision-making.

How do you build a good KPI?

Building a good KPI (Key Performance Indicator) is crucial to effectively measuring performance and guiding a company’s strategic actions. Here is a step-by-step guide to creating an effective KPI:

Clarify Strategic Objectives

Clearly define what your organisation is trying to achieve in the short, medium and long term. KPIs must reflect these objectives if they are to be relevant.

Identify Key Success Factors

Identify the key success factors (KSFs) that are essential to achieving your objectives. These factors will form the basis for selecting your KPIs.

Choose Specific and Relevant Measures

Select specific measures that provide information on performance in relation to the KSIs. Each KPI should be Directly Measurable and Influencable by actions you can control.

Ensuring SMARTitude

Your KPIs must be SMART:

  • Specific: clear and understandable.
  • Measurable: reliably quantifiable.
  • Achievable: realistic with the resources available.
  • Relevant: directly linked to strategic objectives.
  • Temporally defined: associated with a specific deadline.
Define the Data Sources

Identify where and how you will collect the data needed to calculate your KPIs. Make sure the sources are reliable and accessible.

Establish Data Collection and Analysis Processes

Set up processes for regular data collection and KPI analysis. This includes defining the frequency of measurement and responsibilities.

Communicate and train

Clearly communicate the KPIs to all relevant stakeholders. Train them on the importance of the KPIs, how they are calculated, and how their work influences these measurements.

Review and adjust

KPIs are not set in stone. Review them periodically to ensure that they remain relevant to strategic objectives, which may evolve. Be prepared to adjust them in line with changes in the business environment or company strategies.

Integrate Action Mechanisms

For each KPI, define action plans or responses in the event of deviation from the targets set. This ensures that the KPIs are not only performance indicators but also levers for action.

By following these steps, you can build KPIs that provide valuable insights into performance. And that guide strategic and operational decisions, and contribute to the continuous improvement of the organisation.

Why are KPIs important?

There are several reasons why KPIs (Key Performance Indicators) are essential to the management and strategic development of a company. Here are the main reasons why they are important:

Performance measurement:

KPIs provide a quantifiable measure of the performance of a company, department or specific project. They provide a clear view of the effectiveness of the strategies put in place and the achievement of objectives.

Informed decision-making:

By providing objective data, KPIs help executives and managers to make informed decisions. They help to identify areas requiring adjustment or improvement, thereby contributing to the optimisation of resources and efforts.

Alignment of objectives:

KPIs ensure that everyone in the organisation is working towards the same objectives. By defining clear indicators, they facilitate the alignment of individual and departmental objectives with the company’s overall strategy.

Improved communication:

KPIs act as a common language across the business, enabling clear and consistent communication on performance and objectives. This helps to keep all stakeholders informed and engaged.

Motivation and commitment:

Quantifiable and measurable objectives can motivate teams by providing them with clear targets to achieve. Monitoring progress towards these objectives can increase commitment and job satisfaction.

Analysing KPIs over the long term can reveal trends, offering valuable insights into past performance and helping to anticipate future challenges.

Risk Management:

By identifying performance gaps early, KPIs enable a proactive response to mitigate risks before they become major problems.

Continuous optimisation:

KPIs are fundamental to continuous improvement processes. They enable the impact of new initiatives and process changes to be measured, guiding the company towards greater efficiency.

In short, KPIs are essential for navigating today’s complex and competitive environment. They provide the data needed to evaluate, adjust and continuously improve strategies and operations, leading to improved overall performance and long-term success.


KPIs are crucial to the success of your business. By choosing the right indicators, linking them to your strategic objectives and regularly analysing their results, you can considerably improve your decision-making and optimise your performance.

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