Key Performance Indicators (KPIs)

KPIs are measurable values that help organizations assess employee performance and business success. They vary across industries and job roles, including metrics such as productivity, customer satisfaction, and revenue growth.

HR teams use KPIs to set clear performance expectations, track employee progress, and align individual goals with organizational objectives. Effective KPIs contribute to performance management and strategic decision-making.

What is KRA and KPI?

• KRA (Key Result Area): These are the core areas of focus or responsibility in a role. KRAs define what an employee is expected to achieve.
  Example: For a Sales Manager – KRA could be "Increase regional sales."
  
  
• KPI (Key Performance Indicator): These are measurable metrics used to track performance against the KRAs. KPIs define how well the employee is achieving the result.
  Example: For the KRA above, a KPI could be "Achieve 20% sales growth in Q3."

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How to calculate KPI?

KPIs are calculated based on specific metrics relevant to a goal. The general steps are:

1. Define the objective – What are you trying to measure?
2. Choose a metric – Pick a quantifiable indicator (e.g., sales, customer retention).
3. Set a time frame – Daily, weekly, monthly, or quarterly.
4. Use a formula – Combine data in a way that reflects performance.

Example:

To calculate Sales Growth KPI:
Sales Growth (%) = [(Current Period Sales - Previous Period Sales) ÷ Previous Period Sales] × 100

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What are 5 KPIs?

Five commonly used KPIs across industries are:

1. Revenue Growth Rate – Measures increase in sales over time
2. Customer Retention Rate – % of customers retained over a period
3. Employee Turnover Rate – % of employees leaving vs. total employees
4. Net Profit Margin – Profit as a percentage of revenue
5. Project Completion Rate – % of projects finished on time and within scope

These KPIs help organizations track financial, operational, and workforce performance.