KPI Tracking: What It Is and Determining Which KPIs Track

What should you be tracking? What are the most important metrics to track for your company or business?

For modern businesses, key performance indicators (KPIs) are crucial for measuring how the company is doing. KPIs are numerical values that represent your company’s overall performance and can include revenue, employee growth, customer satisfaction, and more.

KPIs can range from company-wide metrics to individual metrics. Knowing how to build proper KPIs will allow you to track your company’s success and identify any potential problems.

It’s important that you create and track KPIs that answer specific questions about how your business is running. This article will give you a rundown of common key performance indicators (KPIs) that companies and organizations watch.

In this KPI breakdown, we’ll also take a closer look at the following KPIs, explaining how each one helps drive success:

• Revenue
• Customers
• Employee Growth
• Profit Margin

What is KPI Tracking?

KPI tracking is the process of collecting and monitoring your organization’s most critical performance metrics through data analytics software and tools. KPI monitoring captures specific business data and turns it into useful information your company can use to measure performance over time. Depending on your needs, this may include operational, customer, sales, project management, financial, marketing, or HR data. 

Using tools like dashboards allows your business to track KPIs from various sources in one place and view data in easily understandable forms, like charts or graphs, rather than raw data in spreadsheets. You can customize your KPI tracking system to include only the metrics most relevant to your performance goals, industry trends, or departmental needs. Tracking KPIs through dashboards lets you easily share your most critical performance data with team members, department leaders, company executives, clients, and other stakeholders.

Your KPI monitoring system shows not only your current standings but also historical information so you can compare your metrics with previous performance or use it for forecasting purposes. Building context around your KPIs enables your organization to generate deeper, more meaningful insights about your company that can drive success and growth.

Why is KPI Tracking Important?

KPI collection and tracking are critical if you want to know where your business stands and how to streamline and improve your processes. It empowers your organization to base decisions on the latest data rather than outdated information, intuition, or guesswork. Monitoring KPIs also enhances the effectiveness of team collaboration and productivity. The most important reasons to track KPIs include:

Optimizing Performance

Monitoring KPIs allows you to analyze different performance metrics and maximize your efforts. Say, for example, you’re tracking ecommerce metrics and notice your sales and revenue are down this quarter. You can then compare them with the same period in previous years to identify the cause, like seasonal shifts. Or contrast them against other metrics, like unique site visitors or cart abandonment rate, to see how these elements are impacting your bottom line. 

Once you recognize where issues lie, you can focus efforts on addressing any problems which will optimize specific processes within your business and improve your overall performance. Your organization can find innovative ways to boost specific KPIs over time.

Developing Benchmarks to Track Progress

Having business goals is great, but unless you’re tracking KPIs how do you know if you’re making progress? With KPI tracking tools like dashboards you can easily develop data-informed benchmarks that are relevant to your specific goals and keep everyone on track. 

You can use data to set timelines and ensure you’re meeting the right objectives. It also helps you stay agile so you can refine and evolve your goals and actions based on data coming in so you can make continual progress and not get stuck.

Making Data-driven Decisions

By correctly tracking KPIs, your business will know exactly how you performed. There’s no guesswork or estimating of your financial or sales figures, marketing efforts, or how customers are reacting to your actions. Your company has the right information they need in front of them to generate insights, solve problems, and make decisions based on accurate, real-time data.  

Improving Team Productivity and Communication

Teams and departments can’t perform optimally without access to all the information that impacts their work and responsibilities. Monitoring KPIs the right way means you’re eliminating siloed data and creating greater data accessibility within your organization. Workers can more easily access data and collaborate with others regardless of their department or location. 

Tracking KPIs aligns goals and processes within your entire business, improving communication between employees and keeping them motivated towards specific goals. This in turn boosts productivity and positively impacts your overall performance.

How to Track KPIs

While there is no general rule on what KPIs to track or how long to monitor metrics, you’ll want to develop a KPI tracking strategy that meets your business objectives and goals. For instance, if you’re interested in examining your company’s long-term growth, you’ll need to track KPIs like revenue, net profit, sales, or employee retention for a greater period of time. You’ll want to compare performance quarterly or annually to reflect overall standings rather than weekly or monthly fluctuations. 

In contrast, businesses that are monitoring marketing campaign performance only need to track marketing-based KPIs—like impressions, click-through rates, conversions, and ROI—over the course of the campaign. You’ll examine and compare data from marketing campaigns more often, anywhere from daily to monthly, to monitor KPIs and adjust your marketing efforts as you go.

Start by selecting relevant KPIs that are pivotal to achieving your goals. Having 5-10 KPIs is a good starting point, since tracking too many metrics at once can prevent you from seeing clear results. Using a KPI monitoring system, like a dashboard, helps you organize and track your KPIs easily and effectively. It collects, analyzes, and presents your data through interactive visualizations so you can understand and monitor your business activities at a deeper level.

Benefits of Tracking KPIs

Monitoring KPIs goes far beyond understanding and maximizing your business performance. Explore the additional ways your KPI tracker benefits your business below.

• Enhances Problem-Solving

When issues crop up, you can look at your data to understand why it’s happening and take action to fix specific elements instead of relying on guesswork or past problems to guide you to a solution. You’ll know if a reduction in web traffic is due to poor social media ad performance or an unsuccessful SEO campaign, and take the right action to address and resolve the problem quickly. 

• Increases Employee Engagement

Workers who are tracking their individual or team performance are more invested in their outcomes, which contributes to greater productivity and growth for your business. A sales team that can easily track top-performing members can incentivize them to work harder, or you could track KPIs to hand out performance-based bonuses. The more engaged your employees are, the more successful your company becomes. 

• Identifies Patterns and Trends

Monitoring KPIs enables you to spot patterns or trends that would have otherwise gone unnoticed. For instance, you may find social media engagement dips around specific times of the year, which also hurts web traffic and sales. This gives your company the opportunity to adjust social media strategies or find other approaches to resume your growth. 

• Builds a Data-Driven Culture

KPI tracking helps your organization develop a data-minded culture, which can help you outperform your competitors. Quantifying your processes and business operations allows your leadership team and employees to view and access important metrics objectively, and use data to drive strategies and actions. Gaining enhanced knowledge about your customers allows you to offer products and services that better meet their needs. While optimizing your operations helps your company run smoothly and take advantage of every growth opportunity.

What KPIs Should I Track?

Whether you’re running a company or managing its finances, there are several KPIs you should be tracking. Let’s take a closer look at each of them and how they help drive your company’s success.

1. Revenue

One of the most important KPIs is revenue. In fact, this is generally one of the very first numbers a business ever tracks. Organizations can report revenue in many different ways, but it’s usually represented as either year-over-year or quarter-over-quarter growth.

At most companies, revenue is used as an efficiency measure. This can be especially important if your company focuses on one product line. For most companies, revenue is also one of the primary drivers for employee compensation.

To track revenue, you’ll want to use tools that can break it down by product line or sales team.

You should pull specific numbers that show how each product is performing compared to last year. These comparisons are helpful when trying to determine future growth opportunities and how your company is doing vs. competitors.

Revenue can also be broken down by customer to find out which are the most valuable.

To do this, you’ll want to track metrics like revenue per customer, percentage of repeat customers, and lifetime value of a single customer. Tracking these numbers over time makes it easier to see which customers are the most valuable and where future growth will likely come from.

2. Customers

The best way to effectively measure performance is to start with your customers.

When a company focuses on customer service, it’s often because their most important metrics are derived from what customers think. Even if you’ve got an amazing product or service, no one will buy from you if your customers aren’t happy.

To track customer satisfaction, be sure to look at metrics about how often customers are purchasing and if they’re making repeat purchases. You can also implement satisfaction scores such as CSAT or NPS and how these fluctuate over time for your business.

You’ll also want to keep tabs on whether or not your customers are referring your business to friends and family. If you notice a sharp decline in any of these categories, you can start looking for the problem from there.

You should also be watching customer lifetime value. This metric shows you how much a single customer spends with your business over the course of their entire relationship.

Customers who spend more with you are usually more profitable, especially if they buy multiple products or refer other customers to your business. Tracking this number allows you to determine which customers are worth keeping around and how much revenue they bring in.

3. Employee Growth

For many businesses, employee growth is one of the most important KPIs to track. This helps you see where your team can improve so everyone works at their highest capacity.

Tracking individual employee growth also lets you identify when someone might be falling behind or when it might be time to find another position for them.

The best way to track employee growth is by using metrics like total sales per employee, average sales per customer interaction, and the average revenue generated per customer.

These numbers show you how effective your employees are at driving value for the business. They also help you identify opportunities to scale, measure the impact of each new hire, and determine which employees are essential to your business’ success.

4. Profit Margin

Just because you’ve started measuring KPIs doesn’t mean you should forget about traditional accounting metrics like net income (profit) and gross margin (gross profit). These numbers remain one of the best ways to measure how successful your business is overall.

However, when you’re trying to track KPIs, it helps to pull numbers that are specific to the products and services offered by your company.

Net income is calculated by subtracting all of a company’s expenses from its revenue. This KPI is important because it shows how much money is left over after paying your company’s bills.

Gross margin tells you the difference between revenue and the cost to produce goods/services sold. It’s essential to monitor this number because it’s one of the best indicators of business health.

The higher your gross margin, the more room you have to work with to expand and take on new risks. 

How to Set Up a KPI Tracking Dashboard

When you track KPIs for your business, it’s easy to see how they influence each other. If your labor costs are increasing faster than you’d like, for example, it might be worth considering changing prices, finding a way to drive more sales, or improve productivity. As long as leaders continue to look at these metrics and consider their customers, employees, and profit margins together, it’s possible to achieve sustainable business growth.

One of the best ways to track all of these KPIs is a KPI dashboard. This data analytics tool gives a quick overview of business performance and helps you find opportunities for improvement. With Domo, setting up and tracking your KPIs can be accomplished in just a few easy steps:

• Define Your Goals: first define the business goals you want to achieve and the KPIs you’ll need to measure in order to track your progress.

• Build Your Dashboard: create or set up a free account with Domo and select a pre-built dashboard based on your industry, operations, or workflow needs.

• Import Your Data: customize the data sources and KPIs you’ll import and track in your dashboard. Choose your preferred data visualizations (line graphs, pie charts, etc) and how you want to organize your data. Domo’s dashboard offers automatic data refreshes, so you’ll see real-time changes in your KPIs.

• Invite Your Team: Domo’s cloud-based dashboard allows users to access and monitor KPIs on the web and through mobile devices, making collaboration and sharing simple. With intuitive features, like drag-and-drop integrations, our dashboards make KPI tracking easy for everyone. 

• Monitor Your KPIs: use the dashboard to track KPIs on your schedule, or enable automatic notifications when data changes or specific thresholds are met so you can stay on top of your performance metrics. 

With Domo’s KPI dashboard, you can get business insights in real-time so you can make the right decisions. Data from the software you already use can be integrated into our dashboard, reducing the amount of manual work required to calculate your KPIs. By monitoring the dashboard often, you can make informed business decisions.

By using a KPI dashboard, you’ll be able to more effectively track your KPI progress and create a long-lasting business plan. It will unlock potential growth opportunities, help you see which strategies are working, and show how your business is trending.