The importance of KPIs reports and KPIs


Numbers, numbers, numbers, it’s all about numbers these days. But digits by themselves don’t mean much. As valuable as collecting information is, it’s made redundant if it’s not put to use in a way that benefits a business. By measuring specific metrics an organization can track important marks, which can give them a sign of whether they are on the right course or they are drifting away somewhat aimlessly. Key performance indicators, a.k.a KPIs, are these magical creatures that are crucial for operating a business properly. In this article, we’ll do our best to demystify them and get a better understanding of why they are so important. As always, grab that favorite drink of yours, and let’s plow ahead.

Definition of KPIs, Types of KPIs & Why using them is so important?

KPIs are measurable values that showcase how effectively a company is performing and how well it’s achieving essential business objectives. They are important because they act as a somewhat real-time feedback system, on how an organization is functioning – whether it’s achieving its goals, or whether it’s falling short. In other words, by implementing them a business is making sure it’s going to get where it has to go. After collecting metrics, which then are used in forming KPIs, they are analyzed and reports are made. 

Depending on the goal those reports can be structured roughly into three types – analytical, operational, and strategic.

Analytical – they are used across all areas of a business for a wide range of cases and can be as broad as this definition.

Operational – they are predominantly focused on the day-to-day activities of a business. Short-term outlines of how a company performs. 

Strategic – they are used to provide a clear picture of a company’s “health” and in which direction it’s heading. These reports show owners and stakeholders how the business is performing in the long run.

Benefits of KPI reports

There are many reasons why KPI reports are important. By analyzing and adjusting accordingly, a business can only benefit from them. Here are four ways how an organization can utilize KPI reports.

To strengthen employee morale

Probably the most under-utilized value of KPIs. We can all agree that a company’s culture is important for performance. Tracking KPIs promotes a sense of accountability and responsibility in employees and by hitting a mark at the end of the day/week/month/quarter/year, a sense of satisfaction is spread across everyone involved. This on the other hand can also motivate everyone else to push themselves more and to achieve even greater results.

Foster personal growth

In the previous paragraph, we mention the benefits which KPIs provide to employees, on a company level. The same logic can be applied on an individual level. If an employee is able to monitor their performance and respond at the moment, they can achieve their goals and better yet, understand how to do it better in the future. With KPIs, which are tracked on a real-time KPI dashboard, teams are able to see exactly how they are performing at any given moment. This sets a tone for constant improvement and a healthy environment for continued personal growth.

Help to make decisions

KPIs are very useful when it comes to making a decision, but they shouldn’t be the sole reason why a certain decision is made. When the time to make a call comes, having the bigger picture in mind is a must. KPIs are in a sense just numbers, the reasons behind those numbers can be many. Always fully examine an issue and never rely on a single KPI report. 

Help to set goals and plans

Every business has objectives and goals that it strives to achieve. Sometimes getting everyone to work on achieving a shared goal can be a difficult task. Once an overall objective has been set, KPIs will help to break the process of achieving it into smaller and more manageable chunks and allow for a step-by-step approach.

How to create a KPI report?

There are five simple steps for creating an effective KPI report.

Create an overview – The first step is crucial. An overview can be a simple outline of what the goals of the report are going to be, and how it’s going to serve the organization. By answering the following questions, a business should set the right criteria:

  1. What is the goal of the report?
  2. Who will the audience be?
  3. How will the report be used – is it strategic or operational? Static or interactive?
  4. When will it be distributed?

Define the KPIs – once the initial objective has been established a business will have a general idea about the metrics which are needed in order to compile the KPIs. The tricky part is how the organization obtains these metrics. Are they reliable and accurate, how are they obtained, etc? 

Present KPIs – visualize the data properly. Make sure everything is understandable and not overly complicated.

Build a prototype – create a first draft of the report. Use dummy data if none other exists and present it to colleagues. Gather their feedback and make the necessary adjustments.

Refine and release – finalize and distribute. Just like any business process, reports need to be adjusted and evolved in order to be efficient. Make sure to perform regular maintenance to avoid report “bloat” and to keep information straight to the point and up to date. 

Examples of KPI reports in different industries

To hopefully make things a bit more clear, we will share a few examples from different industries.

This is what a retail report can look like. This particular example shows information about relevant shopper engagement and associate performance indicators to maximize profits, featuring KPIs such as by-channel sales, and return by % of sales.

A manufacturing report can highlight information such as supply chain and operational efficiency to optimize costs. It can feature KPIs such as availability, performance, quality, etc.

A financial services report can look like this. This demo example shows information regarding relevant customer and team indicators that drive growth while reducing costs. It features KPIs such as utilization, returns on assets, returns on equity, etc.

Closing lines

Every business has to set, measure and analyze relevant KPIs. That’s the surefire way to navigate properly and achieve various objectives with ease. It doesn’t matter if you use a complex CRM or a simple Excel spreadsheet, integrating your KPIs onto an analytics dashboard can be a huge upgrade. Having real-time metrics, all in a single place, allows teams and individuals to improve. Being able to have a detailed overview of which metrics need improvements and which ones are performing well can enhance an organization’s health and allow it to work more efficiently.