Career Development

Most Common Types of Key Performance Indicators

Key performance indicators, or KPIs, are an important component of measuring a company’s progress toward attaining its goals. These tools can indicate whether an organization is on track to reaching its objectives or if action needs to be taken by a company to realign itself with the goals it has set. In this article, you can learn more about KPIs and review some KPI examples that are commonly used in various work settings.

What are KPIs?

A key performance indicator is a measurement used by a company to determine the progress it has made toward a particular goal. A company may use KPIs to ensure it is on the right track to reaching its objectives and to evaluate if its goals are being met on time. KPIs can be low-level or high-level, with low-level KPIs focusing on the performance and progress of teams or departments and high-level KPIs focusing on the achievements of a company as a whole.

Related: Using Key Performance Indicators (KPIs) to Achieve Goals

Commonly used KPIs in the workplace

The following are examples of KPIs that may be used to measure different elements within an organization:

Financial KPIs

  • Net profit margin. This KPI is a measurement of the revenue that is left over after all other expenses have been deducted. The net profit margin informs a business how much profit it has earned after taking care of all responsibilities.
  • Operating cash flow (OCF). The operating cash flow of a company is how much cash is created through its regular operations during a certain period of time. The formula for OCF is as follows: operating cash flow = net income + non-cash expenses – increase in working capital.

Sales KPIs

  • Average time for conversion. This key performance indicator takes into account how long it takes from the first contact to closing a deal. 
  • Average cost per lead. This KPI analyzes how long it takes a sales team or company to turn a lead into a conversion or customer. Cost per lead will vary greatly depending on the industry and method of marketing and advertising.
  • Monthly sales growth. A monthly sales growth KPI measures the decrease or increase in a company’s sales from month to month to determine how much the company is growing each month in sales.

Related: Using Performance Management in the Workplace

Marketing KPIs

  • Sales revenue. Measuring the total revenue that your marketing strategies have brought in is a great key performance indicator that can show a company how effective its marketing campaign is. The formula for sales revenue is as follows: sales revenue: total sales for a year – total revenue produced from customers brought in from marketing.
  • Organic traffic. Determining the organic traffic brought in by inbound marketing is a great way to see how successful an online marketing strategy is. Successful marketing campaigns have high levels of organic traffic.
  • Inbound marketing ROI. Determining a company’s inbound marketing return on investment (ROI) can help analyze the success of a marketing campaign and enables companies to plan for future strategies. To calculate inbound marketing ROI, the formula is as follows: return on investment = (sales growth – marketing investment) / marketing investment.

Related: Why Performance Management Is Important for Your Team

Customer KPIs

  • Customer lifetime value (CLV). This KPI measures how much money a customer is anticipated to spend throughout their tenure of using a product or service with a particular company. Knowing this value can enable companies to determine how much should be invested in getting new customers as well as keeping existing customers. The formula for CLV is as follows: CLV = average value of purchase x amount of time a customer will purchase per year x average length of time in years of customer tenure.
  • Customer acquisition cost (CAC). This key performance indicator determines how much it costs to turn a potential customer into a buying customer. This can be determined with the following formula: CAC = # of customers acquired in a certain time period / costs spent on getting more customers in the same time period.
  • Net promoter score (NPS). The net promoter score is a KPI that determines how likely customers are to recommend your company or brand to others. This KPI can best be determined through the distribution of a survey to your existing customers. Higher scores often means that a company has positive and profitable relationships with its customers.

Operational KPIs

  • Cost performance index (CPI). This KPI measures how financially efficient a project is. The CPI determines how much work is completed in relation to each unit of cost expensed. The formula for this key performance indicator is as follows: CPI = earned value/actual costs.
  • Percentage of projects completed on time. This KPI is essential for organizations that regularly perform a number of projects and can help determine a company’s efficiency in completing those projects. An average of 80% or higher of projects completed on time is considered good. If it is lower than 80%, a company may want to consider hiring new staff or agreeing to fewer projects.
  • Resource utilization. This key performance indicator takes into account how team members use their time when working on a particular project. It helps a company determine how many hours teams are working on billable projects versus non-billable projects and can allow an organization to better delegate billable tasks when needed.