Different Types of KPIs – 4 Major Groups
If you’re reading this article, you already know what a KPI is. You’re also familiar with lots of common KPIs. With those prerequisites under your belt, now you’ll learn how KPIs can be categorized, based on broad qualities they may share.
This can be very helpful to you in determining which categories of KPIs to employ, and how, in driving performance improvements at your business. It can also score you major Sexy Geek Points at the next office party, when you pontificate from on high about the distinction between leading and lagging indicators.
For digestive purposes, we’ve broken the KPI universe into four major groups:
- Qualitative & Quantitative KPIs
- Leading & Lagging KPIs
- Industry & Operations KPIs
- Key Risk Indicators (KRIs) & Key Control Indicators (KCIs)
It’s a big universe out there. Let’s start carving it up.
Qualitative vs. Quantitative KPIs
We’d like to start here because this one is very broad, and very easy to grasp. In effect, it divides the entire world of KPIs into two camps.
You already know what “qualitative” and “quantitative” mean. You wouldn’t be on the OpsDog site if you didn’t already know that the former means “subjective” and the latter “objective.”
Qualitative KPIs aren’t terribly, well, metrical. They’re descriptive. They’re opinion-based. They often rely on assumptions and personal bias. They’re not based on cold, hard facts or raw streams of data. That said, they can still be very important for a business, for the very reason that they can provide insights that quantitative metrics cannot; consider some of these examples of qualitative KPIs:
- Reason customer signed up on website
- Manager performance audit
- Twitter comments
- Customer perception
Quantitative KPIs, on the other hand, are completely mathematical in nature, and are derived from the analysis of raw data. Quantitative KPIs are the Joe Friday of metrics: “Just the facts, Ma’am.” Consider these examples:
- Number of new customers who signed up on website in one month
- Number of calls handled per day
- Sales per employee per quarter
- Percentage of application reworked due to error
As you might have guessed, here at OpsDog, we’re data freaks. Which renders us particularly partial to quantitative KPIs, due to their scientific and unshakably objective nature. (And seriously: If a qualitative KPI is about touchy-feely/warm-and-fuzzy, how do you measure fuzziness? Contact us if you figure this out.)
That said, qualitative and quantitative KPIs can complement each other in a sort of symbiotic fashion, enriching a story and bringing it to life. For example, a high error rate for insurance applications (quantitative) can lead to negative reviews for the company on social media sites (qualitative). See?
Leading vs. Lagging KPIs – Another Way to Carve
Now this isn’t a way to bifurcate the entire KPI universe, as the qualitative/quantitative method was, but the distinction between leading and lagging KPIs can be incredibly helpful for your organization.
The easiest way to grasp this concept is by illustration. So here goes:
Leading KPIs are input metrics that influence how a process or function’s output will change. Leading KPIs are the Magic Eight Ball of the operations world; they can give you a good prediction of a process’ expected output.
They’re proactive. They ingest input. They drive direction. They measure productivity and thus provide visibility into potential process adjustments that can impact the bottom line. Here are some examples of these predictive, leading KPIs:
- Number of marketing emails sent for one-month marketing campaign
- First customer service call resolution (i.e., First Contact Resolution Rate)
- Number of contracts under negotiation
Lagging KPIs, on the other hand, are metrics that indicate the outcome of a process, and how well that process is functioning. The good news is that these metrics are often much easier to find than their leading-KPI brethren. The bad news is that they’re reactive rather than proactive, meaning that they’ll show you the result of the problem rather than the problem itself.
Lagging KPIs follow a leading metric. They trail behind the direction being given. They illustrate the bottom line, rather than affect it in advance. Here are some examples:
- Number of proposals generated from marketing emails
- Customer claims satisfaction level
- Number of applications processed
- Revenue per employee
Industry vs. Operations KPIs
Okay, here’s one more way to divide the KPI universe in two. This one’s pretty easy; check it out:
Industry KPIs are indicators of company performance specific to business products, processes, and organization structures across the macro landscape of a particular industry. (Perhaps if you think of them as “industry-specific KPIs,” it’ll help you remember the definition.) Industry KPIs allow for apples-to-apples comparisons, focusing on the product delivered by the business, the dollars that resulted from the transaction, and the underlying cost associated with creating those products.
For example, you might want to look at Amazon’s market share relative to the rest of the big-box retailers. Or you could compare the growth in revenue for Instagram vs. Snapchat. So remember: “Big macro metrics, same general industry.” These are the kinds of metrics that you find on Bloomberg or Morningstar. Examples include:
- Revenue Growth
- Free Cash Flow
- Market Share
Operations KPIs focus on the performance (i.e., the efficiency and quality of operations, processes, customer service, individual employees, etc.) of any group within the company.
For example, you can employ operational KPIs to measure mortgage lending (e.g., mortgage loan pull-through rate, mortgage loans closed per loan officer, mortgage closing cycle time, etc.). As their name implies, they’re operations-specific (vs. industry-specific, for industry KPIs).
Operations KPIs will be more granular than industry KPIs. These examples will make that clear:
- Billing error rate
- Mortgage application processing cycle time
- Customer satisfaction score
- Total employees per human resources employee (a.k.a. HR Headcount Ratio)
What are KRIs and KCIs?
Don’t worry. We won’t toss a wrench into your gears, just as you were feeling all confident in your KPI-categories knowledge.
These are two different, but related metrics. And once we tell you what they stand for, we bet you’ll figure them out instantly.
It goes like this. KCI is Key Control Indicator and KRI is Key Risk Indicator.
They’re key measurements. They’re just not about performance. But they’re still very important and terribly useful.
Key Control Indicators (KCIs) are used to ensure that adequate monitoring and response protocols have been put in place to proactively mitigate risk and respond to certain scenarios. KCIs shine a spotlight on the quality of planning, maintenance, and due diligence related to risks that can threaten an organization. Examples include:
- Frequency of disaster plan reviews
- Percentage of employees undergoing compliance-awareness training
- Percentage of facility evacuation test failed
- Percentage of employees whose data-access rights have been reviewed in the last three months
- Ratio of employees with more than two years of experience to employees with less than six months of experience
Key Risk Indicators (KRIs), as you’ve probably guessed by now, are established to measure an organization’s current and potential exposure to various risks. KRIs can measure the potential risk related to a specific action that the organization is considering—as well as the risk inherent in the company’s day-to-day operations. KRIs can act as an early-warning system to alert the company of financial issues (lost revenue), operational issues (loss of productivity), or reputational issues (loss of credibility).
Just like KPIs and KCIs, these metrics may vary based on the departments or processes being examined, or the target audience being considered (e.g., line manager vs. senior executive).
Examples of KRIs include:
- Revenue concentration (by industry or customer)
- Percentage of vendor invoices detected to be fraudulent
- Number of employees terminated due to code-of-conduct breaches
- Turnover rate for key positions
- Percentage of products with declining growth forecast
- Cancelled policies as a percentage of total
- IT issues reported
Just think of how much you just crammed into your brain. You now know how to divide KPIs into qualitative vs. quantitative, leading vs. lagging, and industry vs. operations.
But we didn’t stop there. We taught you what KCIs and KRIs are, too. Man, if we make you much smarter, we’ll have to ask for your resume.
As we’d hinted above, all these two-for-one deals don’t encapsulate the entire KPI universe. The operations KPIs—that is, the ones that span countless industries—are so important that they can be subdivided into seven very important categories. But we’ll cover that in another article.
The next article in this series will teach you some important lessons about selecting your KPIs – an important step in your own journey towards improvement.
Or simply dive into our rich trove of KPIs and other data products which you can put to work for you business right this very minute.