Skip to content

5 Reasons Why Key Performance Indicators (KPIs) Are Important

Quite often, I encounter business owners who do not understand how their company works. They fail to record any departmental measurements of their operations throughout the year, leaving them with a stagnant business and no idea where the problems are.

Measuring the correct Key Performance Indicators (KPIs) is critical to your company’s health and performance. When we onboard new customers, we see that some are unsure about what they should be measuring and how to use these powerful tools.

They frequently ask, “Why do we need KPIs?” or “Why use KPIs?” or “Why are KPIs important?” or simply “What are KPIs?” since they believe their current method is not broken. 

Effective KPIs are critical criteria for ensuring that any company target is reached. The value of good KPIs in achieving higher company performance cannot be overstated.

When it comes to KPIs, the most common error companies make is trying to measure too much. The issue with this technique is that if you don’t know which KPIs to track, how can you know if you’re making progress? You’ll never know if you’re succeeding or failing if you don’t know what you’re attempting to accomplish.

KPIs are more than simply the statistics and measurements you put out on a weekly basis; they help you analyse the performance and health of your business so you can make key changes in your execution to meet your strategic goals. Knowing and monitoring the proper KPIs can allow you to accomplish outcomes more quickly. 

A Key Performance Indicator (KPI) is a quantitative indicator that shows how well a company is doing in relation to its key business objectives, quarterly milestones, business objectives, and progress toward your 3-5 years strategic plan.

Why are KPIs important?

KPIs for Monitoring Company Health

KPIs are a measure of a company’s health. To monitor your company’s vital signs, you just need a few key performance indicators (KPIs). Only measure what you wish to improve so that you may direct your energy where you want to see change. 

We’ve discovered that it’s critical to track a few key performance indicators (KPIs) in each of the four categories: employees, customers, processes, and revenue. These are classified as human resources, customer service, business processes, and business strategy. 

First, ensure that you select the appropriate KPIs for your company, and then consider who will be held accountable for them (leadership accountability.)

KPIs for Tracking Progress Over Time

A key performance indicator (KPI) is any quantifiable result that shows whether or not a company is accomplishing its goals. It might be revenue, gross margin, location count, employee count, customer happiness, product quality, employee productivity, or anything else. 

Every quarter, you set these KPIs for yourself and your team so that you know where you stand. Then you track them weekly to see if they’re heading in the right way. If not, modify your activities and warn other departments if you get off course.

KPIs for Making Changes and Staying on Track

In addition to your present performance, you should keep an eye on your leading indicator KPIs to assess how near you are to meeting your objectives. These indicators indicate whether or not you are on pace to meet your objectives. 

You may then modify your plan as needed. For example, if you find that your sales are declining, you may opt to prioritise marketing efforts above product development. 

Leading indicators have two features: they are quantifiable and may be directly influenced. They are useful KPIs to have on your dashboard in order to keep your projects on track.

KPIs to Address Issues or Opportunities

Use a dashboard to combine KPIs so that you have the proper information at your fingertips to address problems or capitalise on opportunities. Assume you’re experiencing a sales downturn. 

Determine a few key performance indicators (KPIs) that can assist you in turning the tide. Put them on a dashboard and monitor them regularly to determine whether you’ve discovered the ideal lever for generating more predictable sales. 

Let’s imagine you have a fantastic concept for a new product. Perhaps you test it with a few clients and use KPIs to evaluate your business model before introducing it on a broad scale; you might track the number of customers interested, the number of funds required to maintain the new product, the NPS score, and so on.

KPIs for Pattern Analysis Over Time

When you measure the same KPIs quarter after quarter, you might start to see trends in your data. There are several ways in which these patterns might benefit your organisation. 

Perhaps you can forecast your weakest quarter and utilise that opportunity to perform a system update or company-wide training campaign. 

Perhaps you’ve noticed that your sales manager constantly predicts that you’ll come in 5 deals over or below where you typically end up at the end of the quarter. 

Perhaps you can identify those team members who are consistently under-performing or over-performing on their KPIs and utilise this data to discuss the impacts, good or negative.

Using KPIs to make a positive change

Most businesses have and track the aforementioned indicators. The function of a KPI might vary depending on the company’s goal. While most businesses will utilise flash reporting to track everyday operations, flash reports may also be used to track projects, risks, and employee metrics.

Because the data captured should be measurable and assessed against a goal, not every statistic can be measured and scored in a flash report. A KPI, in essence, provides a snapshot of all the moving pieces of your business at once.

An excellent KPI dashboard includes a variety of KPIs that align with the balanced scorecard. You want to make certain that you are covering all of the crucial components of your business that are necessary to track your company’s progress toward its critical goals and objectives. 

As a result, the top businesses always have at least two key performance indicators (KPIs) from each of the following categories:

  • KPIs in Financial Perspective – Knowing how much money is coming in and going out of the business on a weekly basis allows you to make necessary adjustments. Rather than resolving an issue 20 days after the end of the month, you may make modifications based on KPI management tools during the week.
  • KPIs in Internal Business Perspective – The majority of businesses have access to a line of credit, which should be utilised for short-term operating capital. A flash report will track the original loan amount, how much the business borrowed against it, how much is left over, and what steps should be taken to minimise the percentage utilised.
  • KPIs in Employee Perspective – Employee satisfaction will not be included in KPIs assessing employee productivity since it cannot be quantified and documented as hard data. Instead, you’ll get information such as the number of hours worked, the amount of income made, the amount of overtime, and the status of the task. 


A KPI is as powerful as it is versatile. A KPI may help you achieve company success by assessing your finances, analysing employee productivity, and tracking the status of a task in progress. 

Key performance indicators might change based on goals, initiatives, and timeframes in your organisation, depending on what you want to achieve.

You should already have a system in place for assessing the metrics required for success. If you need assistance with one, feel free to book a free 1-on-1 session with our DoerHRM KPI Expert!

1 thought on “5 Reasons Why Key Performance Indicators (KPIs) Are Important”

Leave a Reply

Your email address will not be published. Required fields are marked *

How to build

winning teams with KPI?

Hey, I’m Shone Fone Ng. I’m determined to make a business grow. My only question is, will it be yours?


About Shone Fone

Shone Fone is a Serial Entrepreneur for 10 SMEs since 1997, businesses ranging from equipment supply, manufacturing, equipment maintenance and ISO 17025 calibration service, HRM software development and training. He also an award winning entrepreneur of Asia Pacific Top Excellence Brand – Book of The TOP Recognition.

How to build

winning teams with KPI?

Hey, I’m Shone Fone Ng. I’m determined to make a business grow. My only question is, will it be yours?

I hope you enjoy reading this blog post.
If you want my team at DoerHRM to help you build a winning team for your company, just click to speak with our KPI consultant.

Related HRM OKR Articles

Get a free, full-feature trial of
DoerHRM OKR Software for 14 days

No credit card required.

Start using DoerHRM today!

Hi Managers, do your employees have
signs of low motivation?

Through a 30 min FREE consultation,
know step-by-step guide to learn

Have a 1-on-1 free consultation
with our
DoerHRM KPI Expert

Download Free Ebook now!

Please check your email for the download link!