what are key performance indicators kpis 
key performance indicators kpis are quantifiable measurements used to gauge a company s overall long term performance kpis specifically help determine a company s strategic financial and operational achievements especially compared to those of other businesses within the same sector jiaqi zhou investopediaunderstanding key performance indicators kpis also referred to as key success indicators ksis kpis vary between companies and between industries depending on performance criteria for example a software company striving to attain the fastest growth in its industry may consider year over year yoy revenue growth as its chief performance indicator conversely a retail chain might place more value on same store sales as the best kpi metric for gauging growth at the heart of kpis lie data collection storage cleaning and synthesizing the information may be financial or nonfinancial and may relate to any department across the company the goal of kpis is to communicate results succinctly to allow management to make more informed strategic decisions key performance indicators kpis gauge a company s output against a set of targets objectives or industry peers categories of kpismost kpis fall into four different categories with each category having its own characteristics time frame and users types of kpiskey performance indicators tied to the financials typically focus on revenue and profit margins net profit the most tried and true of profit based measurements represents the amount of revenue that remains as profit for a given period after accounting for all of the company s expenses taxes and interest payments for the same period financial metrics may be drawn from a company s financial statements however internal management may find it more useful to analyze different numbers that are more specific to analyzing the problems or aspects of the company that management wants to analyze for example a company may leverage variable costing to recalculate certain account balances for internal analysis only examples of financial kpis include customer focused kpis generally center on per customer efficiency customer satisfaction and customer retention these metrics are used by customer service teams to better understand the service that customers have been receiving examples of customer centric metrics include kpis are usually not externally required they are simply internal measurements used by management to evaluate a company s performance process metrics aim to measure and monitor operational performance across the organization these kpis analyze how tasks are performed and whether there are process quality or performance issues these types of metrics are most useful for companies with repetitive processes such as manufacturing firms or companies in cyclical industries examples of process performance metrics include marketing kpis attempt to gain a better understanding of how effective marketing and promotional campaigns have been these metrics often measure conversation rates on how often prospective customers perform certain actions in response to a given marketing medium examples of marketing kpis include a company may desire operational excellence in this case it may want to track how its internal technology it department is operating these kpis may encourage a better understanding of employee satisfaction or whether the it department is being adequately staffed examples of it kpis include the ultimate goal of a company is to generate revenue through sales though revenue is often measured through financial kpis sales kpis take a more granular approach by leveraging nonfinancial data to better understand the sales process examples of sales kpis include management may tie bonuses to kpis for salespeople their commission rate may depend on whether they meet expected conversion rates or engage in an appropriate number of leads companies may also find it beneficial to analyze kpis specific to their employees ranging from turnover to retention to satisfaction a company may have a wealth of information already available about its staff examples of human resource or staffing kpis include examples of kpislet s take a look at electric vehicle maker tesla tsla for a few examples of kpis in real life these numbers are from its fourth quarter q4 2021 earnings release during the quarter tesla produced a record 305 840 vehicles and delivered 308 650 vehicles 1 production is a big deal for the company because it has consistently been criticized for being bad at ramping up increased manufacturing scale means more market share and profits for tesla for the quarter tesla s automotive gross margin expanded to 30 6 2 gross margin is one of the best measures of profitability for tesla because it isolates its vehicle production costs tesla managed to expand its gross margin in q4 even as sales of lower priced models outpaced its higher margin models 1tesla s free cash flow clocked in at 2 8 billion during the quarter that represented a vast improvement from the 1 9 billion free cash flow in the prior year 2 tesla s level of free cash flow production suggested that the company was reaching a scale of profitability without the help of regulatory credits 3kpi levelscompanies can use kpis across three broad levels first company wide kpis focus on the overall business health and performance these types of kpis are useful for informing management of how things are going however they are often not granular enough to make decisions company wide kpis often kick off conversations on why certain departments are performing well or poorly at this point companies often begin digging into department level kpis these are more specific than company wide kpis department level kpis are often more informative as to why specific outcomes are occurring many of the examples mentioned above are department level kpis as they focus on a very niche aspect of a company if a company chooses to dig even deeper it may engage with project level or subdepartment level kpis these kpis are often specifically requested by management as they may require very specific data sets that may not be readily available for example management may want to ask very specific questions to a control group about a potential product rollout 