SMART KPIs: How to Set and Measure Performance [with Study Case]

When it comes to navigating the success of your business, Key Performance Indicators (KPIs) play a pivotal role.

For this reason, for those of you who are already working or are in the process of applying, it is important to know first:

• What is meant by KPI?

• What is the purpose of implementing KPI in the company?

• How is SMART KPI implemented?

• Learn to set KPIs from study case

Key Performance Indicator (KPI) is a key indicator value of the process leading to the work results you want to achieve.

KPI itself focuses on strategic, operational improvements and as a basis for data-based decision making. It is quantifiable metrics that measure the performance of a business in achieving its objectives.

Thus, it provides invaluable insights into various aspects of your operations, helping you make informed decisions and steer your organization toward success.

For example, the KPIs of a salesperson are:

• {number} of leads contacted in a month

• {number} of prospect meetings in a month

• {number} of products sold in a month

Implementing KPIs in companies has many benefits and objectives to achieve optimal performance.

The following are the KPI goals for employees and companies:

• Provide employees with an understanding of the organization's long-term strategy and what management expects
• Implement work targets so that employees are motivated to work optimally
• Evaluate company and employee performance because it is based on performance data that has been carried out so far
• Give rewards to employees based on measurable performance data
• Sharpening employees' abilities because they already know the goals to be achieved so they will look for the best solution to carry out the process of achieving the goals

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Selecting the appropriate KPIs is crucial. It's not about the quantity but the quality of your chosen metrics.

Therefore, it is necessary to implement the SMART KPI method. SMART is an abbreviation of Specific (S), Measurable (M), Attainable (A), Relevant (R), and Time-bound (T).

The following is a good application of SMART KPIs:

1. Set Specific (S) Goal

The goals to be achieved must be clear and specific so that they are directed and not ambiguous. With specific goals, it can also be predicted when these goals can be achieved and can influence the final results achieved.

For example:

• Sales: Achieve an {number}% increase in monthly sales.
• Marketing: Achieve a ROAS of {number}%.
• HR: Achieve a training effectiveness index of {number}%.
• Developers: Achieve a feature implementation velocity of {number} features per sprint.
• Finance: Keep the budget variance below {number}%.
• Customer Service: Achieve a first contact resolution rate of {number}%.

2. Determine Measurable (M) Numbers

KPIs must be measurable or measurable in value both in terms of quality and quantity, so that they can increase effectiveness and relate to work achievements.

For example:

• Sales: Achieve a 10% increase in monthly sales.
• Marketing: Achieve a ROAS of 500%.
• HR: Achieve a training effectiveness index of 90%.
• Developers: Achieve a feature implementation velocity of 3 features per sprint.
• Finance: Keep the budget variance below 5%.
• Customer Service: Achieve a first contact resolution rate of 90%.

3. Make Sure Your Goal Attainable (A)

KPIs must be realistic and attainable or achievable so as not to get off track, remain focused on the strategy to be implemented, and achieve final results more effectively.

For example, a digital marketer achieved sales of 500 million last year with an advertising budget of 5 million per month. To increase sales by 50% next year, the monthly advertising budget will be increased by 7.5 million per month.

4. Set Relevant (R) Goal

KPIs and the strategy being implemented must be interconnected so that they can help determine the right strategy, get the desired results, and not lose direction during the achievement process.

For example, increasing sales at restaurants by endorsing food influencers every month on Instagram.

5. Your Goal Needs Time bound (T)

Time-bound or clear and measurable time limits are very important to make it easier to measure improvements, determine subsequent results, and suitability for implementing strategies.

For example, increasing the number of followers on Instagram by 75% through a content strategy in feeds and stories every day 5 times within 6 months in 2023.

After understanding the meaning and purpose of KPI itself, you can study the following KPI examples that are applied in this company.

Study Case

Beautylogic is a multinational company engaged in the beauty equipment sector which sells various kinds of machines and consumables for beauty clinics.

Seeing the success of previous sales of fat removal machines of 2 billion in 1 year, Beautylogic's marketing division plans to increase sales of fat removal machines by 2 times next year. Therefore, Beautylogic will recruit and train more salespersons next year and increase the business trip budget to achieve this target.

Specific

Beautylogic's marketing division will implement a strategy to increase sales of fat removal machines by 100% through a salesperson recruitment strategy and a business trip budget of 2 times the amount which will be implemented in 2023.

Measurable

Of course, KPI metrics must be measurable (quantifiable). Avoid using things that cannot be measured as KPIs. You can set metrics like the following image.

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Attainable

The increase in the number of salespersons and business trip budget is realistic and achievable because looking at the data from sales in 2022, it has been successful.

With this strategy, many beauty clinics are easy to reach with many salespersons and the number of business trips made by salespersons to visit clinics that previously could not be reached by companies can now be reached easily.

Relevant

The strategy implemented is relevant because it is still within the scope of marketing strategies to increase sales.

Time-bound

KPI will be measured once every 3 months for 1 year from January 2023 to December 2023.

As we wrap up our exploration of Key Performance Indicators (KPIs), let's remember that these aren't just numbers; they're the compass guiding your journey to success. Making KPIs work for you can truly shape your career path.

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