A Key Performance Indicator, which is also known as a KPI, is a measurement of performance of a selected area within a company.
These are quantitative measurements plotted against a time range and is generally represented in graphs or scorecards.However, some of the KPIs can also be based on geographic locations, percentage of a whole, etc. Still, when looking at performance over time, a time-series graph is the best way to display it. KPIs are derived data based indicators that we are using regularly in our businesses to keep track of the various key functions. See below a few examples.KPIs in the area of marketing are really very commonly circulated data. We see it advertised by the businesses all the time. One of the most common KPI here is the customer base and customer base growth rate. The customer base is usually used to refer to the total number of unique customers that a business has and hence the customer base growth rate is the rate at which the customer base is growing. Depending on how successful (or not) the company is, the data can be positive or negative. The customer base is represented in actual numbers, and the growth rate is usually in percentage.In the area of manufacturing, the usual KPIs are rate of production, volume of production, performance, quality etc. While rates are usually calculated per unit time (units produced per second, units manufactured per month), performance and quality are usually expressed in percentage. The Overall Equipment Effectiveness or OEE is often used as the standard set of metrics to gauge the performance of a manufacturing unit.In the sales department, the usual metrics that require measuring are sales volumes, percentage of returns, growth, etc. So KPIs for sales are the indicators that show the data representing these factors. For instance, sales volume can be represented in numbers per month or volume per month, depending on the item. Out of this number, the ratio that was returned would the percentage of returns.There are also KPIs for personal performance of employees. If they are salespeople, these would include the annual revenue that they single handedly generate. Their growth rate, fluctuation etc can be easily charted. For websites and multi-national organizations, geographical data is also very important to locate the locations of the visitors and clients.KPIs are mainly used to watch of performance, fluctuations and to spot commonalities and repetitions and deviations from plan. These are then analyzed to determine real world causes, trends, etc. For example, if more customers are ordering from the businessin one market, then the business needs to make sure of - a) holding the good results market, b) identifying what worked successfully and c) implementing the best practices in other areas if it is capable. Another reason for key performance indicators is problem solving. For example, if a typical month is always low for orders, then other factors need to explored, such as customer profiles of those who are ordering and those who are not, etc. KPIs thus are necessary in business analysis, business planning, problem solving and trend spotting.