Key performance indicators (KPIs) are metrics that measure how successful your company is at accomplishing a goal or objective. They are the strongest indicator of whether or not your business is successful. The challenge is knowing which metrics are the most effective for achieving your goals, as well as how to present those metrics to the key stakeholders in your organization.
Defining the Right KPIs
There is no “one-KPI-fits-all” solution when it comes to defining your company’s key performance indicators. KPIs should be tailored specifically to your business model and objectives, so you can get a solid understanding of the health of your company by simply looking at the status of your KPIs. If your KPIs are on track, your business is as well.
Steps to Building Custom KPIs For Your Business
- Evaluate your goals and objectives: What is the purpose of your company? What determines whether or not you are successful? The answer to these questions can help you better understand what metrics will help you reach your goals.
- Focus on between 4 and 10 KPIs: There are so nearly infinite things in your business that can be measured, but less is more when it comes to monitoring KPIs. These should be the metrics that are the most critical towards your success. If you track too many, it can become overwhelming and pointless.
- Reassess and review: Be critical of your KPIs and check to make sure that monitoring them is a good use of your time. They should be moving the needle and improving your company’s performance. If they aren’t, it may be time to think of some better KPIs.
Presenting Your KPIs
Data presentation matters. In order for a data analyst’s recommendations or analysis to generate real action, they need to be heard (and understood) by stakeholders. When information is not presented clearly and effectively, it may be hard for business-minded people to understand the importance and value of the data in front of them. The goal of KPI presentation, then, should be to make data understandable and easily comprehensible.
The Psychology of Data Visualization
Data visualization allows you to maximize pre-attentive processing and quickly absorb complex information. When you are looking at a chart or graph, your brain will automatically identify unique elements and patterns. On the other hand, numbers on a spreadsheet require the viewer to actively analyze and examine to find key insights, which can be mentally exhausting.
Data visualization takes those seemingly random numbers and turns them into aesthetically pleasing visuals. You can tell a narrative with your data and integrate already learned information for quicker and more established connections. This connects your short and long-term memory, which helps you more permanently remember the information.
3-Step Process for Processing Information
- Visual Sensory Register: Information first processes through here, which is part of pre-attentive processing. Before you are even aware you are processing information, certain things will stand out and objects may be unconsciously grouped together.
- Short-Term Memory: Your short-term memory has a limited capacity. Anything that is not considered useful is discarded, so you can only retain about 3-9 “chunks” of visual information.
- Long-Term Memory: Your long-term memory retains meaningful information, not the precise details.
Tips for Communicating KPIs
- Keep it simple: Don’t overwhelm your audience with data. A clear and concise message is easier to comprehend and remember.
- Choose the appropriate chart: Not all chart types will accomplish the same goal or tell the same story. That’s why it’s important to take some time to understand the different chart types so you can select the best option for your visualization. This infographic can help you choose the right chart for your KPIs:
- Use color with intention: Color is a crucial element of data visualization design. It can simplify complex graphs, influence the feel of the data, or add contextual depth to data. It’s important to be consistent with your color choices and use plenty of contrast to make your visualizations easy to read and understand.
- Tell a story: It’s easier for stakeholders to understand the data if you accompany it with a narrative and helpful context. They should be able to quickly sum up what action needs to be taken based on what they learned from the information you presented.
Author Bio: Samantha Marsh is the Marketing Content Coordinator for iDashboards, a data visualization software company on a mission to transform reporting into meaningful dashboards.