The Importance of Setting the Right KPIs for Your Business

How can you set the right KPIs in your business without overthinking, under-measuring or even creating the wrong incentives? This article will help you.

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Everyone wants to measure their success, and setting key performance indicators (KPIs) is a great way to do that. But measuring alone won’t do you any good if you don’t know how to choose the right KPIs for your business. Knowing which metrics are important and what goals to pursue with them can make the difference between success and failure. That’s why we’re here – to show you how to set the right KPIs for your business, not just any KPIs.

With our help and this article, you’ll learn how to develop metrics you need to track progress and determine the success of your business.

Understanding KPIs

Key performance indicators (KPIs) are metrics used to measure the success of a business. They are typically performance indicators that enable companies to track progress and determine whether their business strategies and tactics are working.

On an absolute basis, KPIs can be divided into two main categories: financial and non-financial (maturity). Financial KPIs measure the overall financial health of a business, such as profitability, operating margins, return on investment (ROI), etc. Non-financial KPIs focus more on measuring the effectiveness of specific processes or operations within an organization, such as customer satisfaction or employee engagement. Both KPIs are important in understanding how well a company is performing.

Read here the full article on KPIs: What are KPIs? – Definition, Types, Benefits of Key Performance Indicators (KPIs)

When setting KPIs for your business, you need to consider all the factors that affect performance. Each KPI should have a clearly defined goal that you want to track and be directly related to your overall business goals. That way, you can focus on what matters most to the success of your business. Also, too many KPIs can lead to information overload. That’s why it’s important to set only the most important metrics so you can make informed decisions about the future of your business.

For more information about setting up key performance indicators for your organization, we recommend reading our full article about 200+ of the most critical KPIs, which contains detailed explanations of each metric and how they can best be utilized in various areas of a business.

Setting the Right KPIs

So now we are on the topic of the “right KPI.” But what is the “right KPI”? The right KPIs measure progress toward your business goals and provide actionable insights. It is important to remember that each KPI should be directly related to a specific purpose, such as increasing sales or improving customer satisfaction.

  1. Aligning KPIs with Business Objectives: The first step in ensuring you have the right KPIs and data for them is to align your KPIs with your business objectives. Each KPI should be related to a specific goal, such as increasing sales or improving customer satisfaction.
  2. Identifying the Most Relevant KPIs: Once you have determined what goals you want to achieve, it is essential to locate which metrics are most relevant and necessary for tracking progress toward those goals. Identifying the most relevant KPIs helps ensure that you focus only on those metrics that will provide actionable insights into how well your organization performs against its defined objectives.
  3. Establishing Clear & Measurable Targets: When setting up your KPIs, they must include clear and measurable targets so you can track results over time and make informed decisions about any changes needed moving forward.
  4. Choosing the Right Data Sources & Tools: Once all of the above steps have been taken care of, selecting the best data sources and tools available for collecting information from these KPIs to measure success accurately and efficiently over time is essential.

Implementing and Monitoring KPIs

There are several steps to take when it comes to implementing and monitoring KPIs:

  1. Please choose the right KPIs: Before implementing any KPIs, you must decide which indicators are most relevant to your business objectives and will best measure progress towards them. This involves assessing all available metrics, selecting those directly related to your goals, and providing actionable insights. The importance of choosing the “Right KPIs” can not be overstated, as most companies fall into this trap!
  2. Establish Targets and Benchmarks: Once you have chosen the right KPIs, it is important to set targets and benchmarks so that progress towards goals can be tracked over time. This allows for better decision-making to make changes or adjust strategies if necessary.
  3. Gather Data & Monitor Performance: The next step is to gather data from the relevant sources and tools and track performance against these KPIs over time. The process involves regularly monitoring results, making adjustments where required, and looking for opportunities to improve performance further.

Benefits of Monitoring KPIs

By monitoring your company’s KPIs on an ongoing basis, you can make more informed decisions about the future of your business. You can better manage your resources, set realistic goals, and identify areas that need more attention to achieve desired results. It also allows you to identify potential problems early, so they can be addressed quickly before they develop into major issues.

The role of technology and infrastructure in tracking KPIs

Tracking KPIs is an integral part of the entire process, and it’s important to have the right technology and infrastructure in place to help you with this task. These KPI tracking systems include data collection, analysis, reporting, and resources to securely store and manage data. It’s also important to think about how the data you collect will be used so that the insights gained from the KPI tracking process lead to more accurate decisions.

You might also consider using KPI platforms that offer benchmarking, external data sets, and extensive options for KPI comparisons, like MoreThanDigital Insights.

Understanding the positive and negative Impact of KPIs

It is important to understand the positive and negative impacts of KPIs. Good KPIs can provide valuable insights into performance, help with decision making, and increase efficiency in the organization. But they can also lead to short-sighted decisions if not managed appropriately, and an overemphasis on short-term goals instead of longer-term strategies.

Here are some examples of the positive and negative impacts of using KPIs:

Positive Impacts of Using KPIs:

  • Helps identify areas for improvement and focus resources efficiently.
  • Allows organizations to measure progress towards goals and track performance over time.
  • Provides actionable insights into how well the organization performs against its objectives.
  • Drives data-driven decisions based on accurate information and analytics.

Negative Impacts of Using KPIs:

  • Can lead to wrong directions if not chosen correctly or monitored appropriately.
  • Can create a “number fetish” where people become more concerned with meeting targets than fulfilling customer needs.
  • May put an overemphasis on short-term gains instead of long-term successes.
  • Could lead to demoralization among employees due to unrealistic expectations from management teams based solely on achieving KPI targets.


Having the right metrics for your business can significantly impact its success. However, many companies fail to establish the right KPIs. Goals need to be clearly defined and performance needs to be regularly reviewed against those goals. With these insights, you can better manage your resources, set realistic goals, understand which areas need more attention, and quickly address potential issues before they become major problems.

Use technology and infrastructure like KPI platforms like MoreThanDigital Insights to help you collect and analyze data so you can make informed decisions about the future of your business based on accurate information and analysis.

This way, you’re sure to achieve sustainable performance improvement at all levels of your business!

Please note: Regularly check if your KPIs lead to wrong incentives or behaviors – setting KPIs and targets can lead to mental shortcuts and destroy more than help.

Benjamin Talin

Benjamin Talin is founder of MoreThanDigital, a serial entrepreneur and innovator. He has founded countless businesses, ranging in age from 13 to the present. His passion is using technology and innovation to change the status quo, and his experience covers everything from marketing to product development to new technology strategy. One of Benjamin's great desires is to share his expertise with others, and he frequently speaks at conferences on a variety of topics related to entrepreneurship, leadership, and innovation. Additionally, he advises governments, ministries and EU commissions on issues such as education, economic development, digitalization, and the technological future.

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