How To Write KPIs In 4 Steps + Free KPI Template

What Does KPI Stand For?

KPI stands for Key Performance Indicator, a measurable value that shows the organization's progress toward achieving key business objectives. Organizations can use KPIs as a way to track whether their key business objectives are on track, behind, ahead, or have been achieved. 

KPIs are typically used to assess performance against a benchmark (target) or industry standard. They can be applied to various business areas, such as marketing, sales, customer service, and operations, and are often used to guide decision-making and drive continuous improvement.

Check out our KPI Meaning & KPI examples article with 84 examples from different industries!

4 Reasons Why KPIs Are Important 

Like the famous Peter Drucker once said: "You can't improve what you don't measure."

So, running a business without KPIs is like driving a car with your eyes closed. You don't really know where you're going, and the chances are it won't have a happy ending. 

Now that we've established how fundamental KPIs are for a company's success, let's look into why they are so important and what benefits they provide to organizations:

Act as a scorecard for company health

KPIs provide a snapshot of how well a company is performing. By tracking metrics that are aligned with business goals, KPIs can help managers and leaders quickly assess company health and identify areas that need improvement. KPIs can also provide an easy way to communicate performance to stakeholders, such as investors, partners, or employees.

Measure progress through the tracking of metrics

KPIs allow organizations to track progress toward specific goals and objectives. By measuring and analyzing data on a regular basis, organizations can gain insights into what is working well and what needs improvement. This information can be used to make data-driven decisions, adjust strategies, and optimize processes for better outcomes.

Help identify when to make adjustments

KPIs can help organizations identify when to make adjustments to strategies or operations. By tracking performance against established benchmarks, KPIs can reveal trends and patterns that may indicate areas of concern or opportunities for improvement. This information can be used to make informed decisions about when and how to make adjustments to optimize performance.

Recognize and analyze patterns

KPIs provide valuable insights into patterns and trends in performance over time. By analyzing KPI data, organizations can identify patterns and trends that may indicate underlying causes of performance issues or opportunities for improvement. This information can be used to guide strategic decision-making and inform ongoing efforts to optimize performance.

🎥 If you’re more of a visual learner, watch our video on how to write KPIs for a straightforward, step-by-step guide:

Quick Overview Of Writing KPIs In 4 Steps:

1. Determine strategic objectives
2. Define success
3. Decide on measurement
4. Write your SMART KPIs

✋🏼But before we zoom into each step, let us give you an important tip: don't copy your KPIs straight from someone else's list!

While there's a wealth of KPI examples available online - scrolling through industry lists, picking out a KPI and attempting to force it into your strategy won't do you any favors.

Why?

Well, KPIs should be developed to contribute to achieving a specific strategic objective. If they're not developed with a specific strategic objective in mind, they run the risk of stealing attention, time, and money from KPIs that actually help to achieve strategic objectives.

The best KPIs for YOUR business are designed by starting with YOUR specific business objectives. Now, this is not to say all the content available on KPI examples is useless, because it's definitely not - it's actually an important resource. But, looking through KPI examples shouldn't begin till AFTER you have determined your own key strategic objectives.

Ok, let's get into it! 👇🏻

How To Write KPIs In 4 Steps

Your organization's business model, industry, and even the department in which you operate will have an impact on the type of KPI you need.

Luckily, we've devised a best practice process for how to write KPIs that will allow you to create the perfect KPIs every time.

Step 1 - Determine the key strategic objectives

Before writing KPIs, you'll first need to determine which of your organization's strategic objectives you're trying to gauge.

If you've been following along our mini-series "How To Write A Strategic Plan: The Cascade Model' then you will have already defined some strategic objectives for your organization, and you're ready to create some KPIs.

If you haven't defined any strategic objectives (or goals) for your organization yet, check out this article first and then jump back over here to create your KPIs.

E.g. Strategic Objective: Increase the flow of the marketing pipeline by 2025.

Step 2 - Define success

Now that you've identified your strategic objectives, you'll need to begin thinking about what the success of each objective looks like.

Sticking with the same example used in Step 1, if my objective is to increase the flow of the marketing pipeline, the success of this objective means increasing the number of contacts that enter the pipeline, and increasing the number of contacts that pass through the end of the pipeline and get handed over to Sales.

By first defining what success looks like, deciding how you will measure the success of your objective becomes a lot easier.

When defining the success of your KPI, you will usually find there are multiple parts to the definition of the success of your objectives. In the example used above, we found there were two parts to achieving the success of our objective:

1. Increasing the number of contacts that enter the pipeline.
2. Increasing the number of contacts that pass through the end of the pipeline and get handed over to Sales.

As mentioned earlier, this is the time when it might be useful to look through a few KPI examples to help get some inspiration for how you can define the success of your key business objectives.

Again, you should avoid copying KPIs straight from a list, as, chances are, they won't perfectly fit your strategic objectives. Instead, use the KPI examples as a way to ideate how you can measure the success of your own strategic objectives.

We've collated a whole bunch of KPI examples already and grouped them by the department to help give you a little inspiration:

1. Sales KPIs
2. Operational KPIs
3. Marketing KPIs
4. Financial KPIs
5. HR KPIs
6. Customer Service KPIs
7. Health & Safety KPIs
8. IT KPIs
9. Change Management KPIs
10. PMO KPIs
11. Product Management KPIs

Looking for specific industry KPIs? We also have some of those:

1. Retail KPIs
2. Healthcare KPIs
3. Higher Education KPIs
4. Manufacturing KPIs

Step 3 - Decide on measurement

Next, you'll need to decide how you will actually measure success. Going back to our example once again, we've identified that the success of our objective means increasing the number of contacts that enter our pipeline AND increasing the number of contacts that pass through the end of our pipeline

Let's start with the first part of this - Increasing the number of contacts that enter our pipeline. Contacts enter our marketing pipeline when they subscribe to our mailing list or exchange their details for content for the first time.

When contacts engage in either activity, they automatically get added to our marketing automation platform as a subscriber. Using the number of new subscribers added to our marketing automation platform over a time period is an easy way for us to measure the number of contacts entering our marketing pipeline.

Now let's look at the second part - Increasing the number of contacts that pass through the end of our marketing pipeline. Contacts pass through the end of the marketing pipeline when they're ready to be handed over to our Sales Team.

We use the term "SQL" (Sales Qualified Lead) to define a lead that has moved through the end of our marketing pipeline and is ready for our Sales Team to pick up. Our marketing automation platform adds a tag on each contact profile to identify which life-cycle stage they are in based on a certain activity.

Again, through our marketing automation software, we can use the number of contacts who become a SQL in a given time period to measure our success.

This is where it might be wise to start considering dashboard software to track and display your KPIs.

You'll likely use various platforms and tools across your business to measure your KPIs, but having a central location to track and view all your departmental and organizational KPIs will ensure you have a clear view of your success.

Cascade's Dashboard feature is extremely powerful and allows you to pull data from all around your business, so you can display your most important information, real-time, to whoever in your organization needs it.

📚 Recommended read: 10 Popular KPI Software Tools To Connect & Visualize Your Data (2024 Guide)

Step 4 - Write your KPIs

Finally, it's time to begin actually writing your KPIs. KPIs should follow the SMART format (specific, measurable, attainable, relevant, and time-bound), to ensure your KPIs meet this criterion, we've devised a formula that you can follow to ensure you end up with SMART KPIs every time. 

The main advice here is to keep things simple. KPIs should be understood by everyone within the organization. That means no jargon (if possible), and keeping them to one sentence long.

We suggest a structure as follows:

Action + Detail + Value + Unit + Deadline

Putting it all together, our KPI example may look something like this:

Writing KPIs Example 1

• Increase new HubSpot lead profiles to 40,000 people by 31st December 2025

Writing KPIs Example 2

• Increase new SQL profiles to 20,000 people by 31st December 2025

Starting off with a verb forces you to be specific about what you’re trying to do. A metric and unit ensure your KPI is measurable and a deadline will do wonders for staying timely on your progress.

How Are KPIs Used In An Organization?

Key performance indicators are a communication tool for organizations. They inform business leaders of their organization's progress towards reaching key business objectives.

KPIs are able to provide this information because they actually track the most important performance measures, which can be taken together to represent how successful you are in achieving an objective.

This information channel is extremely valuable as, in a well-designed strategy, an organization's key business objectives should have a direct impact on the organization's overall performance.

Therefore, KPIs will communicate whether your activities are achieving, for example, business growth at the rate expected or not, and how much growth you've actually achieved.

KPIs also assist in identifying issues with organizational processes. If the progress on an objective falls behind, the key performance indicator associated with it will communicate this to business leaders as soon as the trend begins to show itself (assuming you have leading & lagging KPIs).

The organization will know that something has gone wrong and an investigation is required. A strategy to mitigate the issue can then be created and implemented before it has far-reaching effects on the organization's performance.

How Many Key Performance Indicators Do You Need?

The question of how many key performance indicators you need will vary with every company. However, we do have a framework that you can apply to help you assess how many KPIs you'll need to implement for your organization.

The number you need will depend on how many key business objectives you have in your organization. As a rule, we generally say you should have 2-3 KPIs per objective, to ensure a variety of measures without overwhelming the picture.

The reason we use a minimum of 2 KPIs as a rule, is because we believe each business objective should have at least 1 leading indicator and 1 lagging indicator.

This allows you to predict future performance as well as record the actual performance and compare these to the direction of your business objective.

Alternative Vs Value-Based Decision-Making

To get a better understanding of why you should always start the KPI process by having first defined strategic objectives, consider the two potential ways of deriving your KPIs:

• Alternative-based decision-making
• Value-based decision-making

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Alternative-based decision-making relies on choosing your preferred option from the alternatives offered.

Example:

Decision maker: I would like a coffee

Waiter: Sure, what milk would you like?

Decision maker: What do you have?

Waiter: We have full cream, skim, or soy milk?

Decision maker: I'll take the full cream milk.

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Value-based decision-making relies on assessing what matters most to you and then making a decision that meets your needs.

Example:

Decision maker: I would like a coffee

Waiter: Sure, what milk would you like?

Decision maker: (Considers objectives: I like a good tasting coffee, but also want to keep the fat content down because I'm watching my weight) I'll take soy milk with one serve of artificial sweetener.

Waiter: No problem.

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As you can see, the decision-maker in the first example listened to the alternatives presented and then selected their preference based on the options given.

However, the decision-maker in the second example examined their objectives and what they really wanted from a cup of coffee first and then made a decision that met their needs.

When writing KPIs, using the alternative-based approach and scrolling through industry KPI lists will leave you with your preferred KPI from that list, but achieving that KPI won't necessarily mean you've achieved your strategic objectives.

On the other hand, using the value-based approach and considering your key strategic objectives first will ensure you end up with KPIs that once achieved, will mean you've also achieved your strategic objectives.

What Are Leading And Lagging KPIs?

Leading and lagging KPIs are often mentioned when it comes to strategy, but what is the difference between the two? A leading KPI indicator is a measurable factor that changes before the company starts to follow a particular pattern or trend.

Leading KPIs are used to predict changes in the company and future performance, but as predictors, they cannot always accurately forecast the future. On the other hand, a lagging KPI is a measurable fact that records the actual performance of an organization.

Leading key performance indicators are often easier to influence than lagging KPIs, however, generally measuring them can prove more difficult.

Lagging KPIs, on the other hand, are usually easier to measure, though much harder to influence. If you'd like to learn more about Leading and Lagging KPIs, check out this article.

KPI Reporting: Tracking & Communicating Performance

Creating relevant, measurable, and time-bound key performance indicators is great, but it's only half the job done. The other half (which can often go overlooked) comes down to figuring out how to actually track and report on them appropriately and accurately.

While it can be tough setting up this kind of tracking and reporting, if you don't create an easy way to view and stay on top of progress, the KPIs aren't going to be of much use. A KPI report is a presentation that displays and communicates the current performance of an organization compared to its business objectives.

It's a tool used by management in order to analyze performance and identify issues. These reports can take many formats, including formal written reports, spreadsheets, powerpoint slides, or dashboards.

KPI Dashboards

Creating a KPI dashboard is a great way to provide at-a-glance views of key performance indicators relevant to a specific business objective, department, or the whole organization.

Now, before your eyes glaze over with boredom as another business term is introduced, dashboards are just another name for a progress report. However, what makes dashboards more powerful than your typical business report is that they're usually hooked up to business systems so the data is automatically updated.

The benefit of this is it ensures the data is always relevant, as it doesn't rely on someone in the organization continuously updating numbers. This is just one of the many benefits of using dashboard software for your strategy report.

Dashboards also give you total visibility of your business performance instantly, display KPI progress in a visual presentation to keep reporting engaging, and save time when compared to the hours poured into creating regular reports.

Kick Off Your KPI Reporting With Our Free Template

To help you get started with KPI reporting, we offer a free KPI reporting template. This template includes two styles within the same spreadsheet, each on different tabs:

1. Table Style KPI Report

The Table Style KPI Report is perfect for detailed, tabular presentation of your KPI data. It's ideal for those who need a thorough, systematic way to enter and analyze KPI data over time.

Pros:

• Comprehensive structure: You'll find multiple columns to capture a wide range of KPI metrics, ensuring no detail is overlooked.
• Instructional content: The initial rows include references and placeholder text to guide you in easily populating the template.
• Detailed analysis: It's perfect for in-depth analysis and structured data entry.

2. Dashboard Style KPI Report

The Dashboard Style KPI Report is designed for visual and summarized representation of KPI data. This format is ideal for quick insights and high-level overviews.

Pros:

• Visual presentation: This style emphasizes charts, graphs, and other visual elements for simple data interpretation.
• Quick insights: It provides at-a-glance views of key performance indicators, ideal for stakeholders needing fast performance assessments.
• Summarized data: It's high-level summary view, enables you to quickly identify trends and areas needing attention.

Why use our KPI Reporting Template?

Our KPI reporting template is a great starting point for tracking and reporting your key performance indicators. Here’s how it can benefit your organization:

• Enhanced visibility: Whether you choose the table or dashboard style, our template ensures that all relevant data is easily accessible and interpretable.
• Improved decision-making: It provides a structured way to track and analyze KPIs, supporting data-driven decisions, strategy adjustments, and process optimizations.
• Efficient communication: Makes it easy to communicate performance to stakeholders, ensuring alignment and informed progress towards key objectives.

Limitations of using spreadsheets for KPI Reporting

While spreadsheets are a useful starting point for KPI reporting, they come with several limitations, especially for dynamic and collaborative environments:

1. Static nature: Spreadsheets need manual updates, making real-time tracking difficult and time-consuming.
2. Version control issues: Sharing spreadsheets across teams can lead to multiple versions—we've all been there—causing confusion and misalignment.
3. Limited collaboration: As a static tool, they hinder collaboration and real-time input from multiple users.
4. Data integration challenges: Combining data from various sources into a single spreadsheet can be difficult and prone to errors.

These limitations highlight the need for a more robust, integrated solution as you scale your KPI tracking and reporting efforts.

Take Your KPI Reporting To The Next Level With Cascade 📈

While our KPI reporting template is an excellent resource to get started, as you move forward in your KPI journey, a tool like Cascade is the best choice for a more comprehensive and efficient solution. Here’s why:

1. Real-time tracking: Cascade allows you to track the progress of your strategic objectives in real time by easily assigning measures (or KPIs) to those objectives.
2. Automated updates: Instead of manually updating your KPI progress, you can automate the process by integrating Cascade with tools like Microsoft Excel or Google Sheets.
3. Centralized dashboard: Cascade’s powerful dashboard and reporting features pull data from across your business, displaying your most important information in real-time.
4. Enhanced collaboration: You can easily add descriptions for context, set timelines, and involve collaborators to ensure everyone is working towards the same goals.

👉 Here's how to set it up in Cascade: 

1. Select the objective: Choose the objective you want to track and add the KPI, giving it a name that specifies how you want the objective to be assessed.
2. Set timelines: Set a start date and end date to establish a timeline for your KPI.
3. Define values: Set the initial and target values for your KPI and clarify the unit you'll be using to measure the result.

You can also give your KPI a description to provide more context and add collaborators that will also be working on achieving that KPI.

🚀 If you want to take it a step further, when you're building your KPIs you can choose the automated tracking option and integrate Cascade with other tools from your business system—we have +1,000 integrations available!

After your KPIs are set in place, you can use Cascade's Report & Dashboard functionalities that allow you to visually see the progress of your KPIs in real-time:

Our KPI Reporting Template (in Excel) is a great tool to kick off your KPI reporting journey. But as you grow, we recommend you transition to a tool like Cascade for a more integrated, automated, and powerful solution.

Want to see Cascade in action? Get started for free or book a 1:1 demo with Cascade's in-house strategy expert.

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📚Editor’s note:

This article was originally part of our ‘How to Write a Strategy’ series. You can find the individual articles here:

1. How To Write A Strategic Plan: The Cascade Model
2. How to Write a Good Vision Statement
3. How To Create Company Values
4. Creating Strategic Focus Areas
5. How To Write Strategic Objectives
6. How To Create Effective Projects
7. How To Write KPIs (This Article)