What Is the Meaning of Key Performance Indicators? - meaning of kpi

What Is the Meaning of Key Performance Indicators? -  meaning of kpi

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KPI guides

Key performance indicators are an important tool for measuring firm performance. Managers should understand what key performance measures are as well as their purpose and benefits. Understanding key performance indicators will allow managers to use them for the benefit of the firm, which can lead to improved company performance.

Definition

In business, the term 'key performance indicators' refers to measurable metrics that are used to evaluate the performance of a company. They are not, however, just any measure of performance; because they are "key" performance indicators, they represent only the most important measures of a company's performance.

Types

There are several types of key performance indicators. The most commonly used indicators in business are financial indicators such as return on investment, profits and market share. Key performance indicators can also be used to measure things such as firm reputation, brand recognition and customer satisfaction. Which key performance indicators are relevant will depend entirely on the individual business and its strategy.

Purpose

The purpose of key performance indicators is to measure and monitor the performance of a firm. Firms will typically examine key performance indicators with the expectation that they will improve over time. When they do not improve it can indicate an underlying problem that needs to be addressed. Key performance indicators can be used to support the overall strategy of a firm and to monitor the progress towards achieving firm goals.

Advantages

The use of key performance indicators can increase firm performance by allowing businesses to monitor performance and to make adjustments in order to improve it. Because key performance indicators represent only the most important performance measures for a firm, it is possible to focus on them and to ignore other metrics. This allows a firm to be more efficient and to spend less time and fewer resources when analyzing performance.

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