IT Glossary
What is a KPI?
Key Performance Indicator: the number that says whether the business is moving toward its goal — few, well chosen, measured constantly.
Any company produces hundreds of numbers; KPIs are the few worth watching religiously — the indicators tied directly to business objectives. Not how many visits the website had (interesting) but how many qualified quote requests it produced (decisive); not how many invoices went out but how many days it takes to collect the money, the figure that strangles or frees cash flow. Choosing them is strategy in compressed form: for each objective — grow profitably, deliver faster, reduce dependence on the biggest client — one or two indicators that measure it honestly, each with a target and an owner. The discipline of the small number is the essence: five to seven company-level KPIs get watched; thirty get elegantly ignored in a report nobody opens. The technical half is where software enters: a living KPI is computed automatically from source systems — ERP, invoicing, CRM, bank — and lives on a dashboard refreshed daily, rather than being rebuilt manually in a spreadsheet on the fifth of each month with slightly different definitions every time. Three classic traps deserve naming: vanity metrics that climb prettily without touching money; targets becoming ends in themselves (Goodhart's law — teams optimise the number, not the reality); and measurement without decisions, the indicator that never changes any action and is merely expensive decoration.
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Why it matters for your business
Management attention, focused
Five well-chosen numbers state the company's condition in thirty seconds — decision energy goes where it matters, not into noise.
Deviations caught in time
An indicator measured daily or weekly shows the bad trend at its start — not in year-end statements performing autopsies.
Accountability without ambiguity
A KPI with a clear definition, target and owner turns 'let's grow sales' into a verifiable commitment — and evaluations into conversations about figures.
Frequently asked questions
What are the baseline KPIs for a smaller company?
A nearly universal skeleton: sales versus target, gross margin, days sales outstanding, quote conversion rate, plus one or two specific to the model — average basket and return rate in e-commerce, utilisation in services, equipment effectiveness in manufacturing. Then personalise: a good KPI answers 'what kills us or grows us specifically?'
How many KPIs should we track?
Company level: five to seven. Each department can carry its own three to five, aligned upward. The periodic hygiene test: for every indicator, 'which decision did we change because of it in the last quarter?' — numbers without an answer get retired from the dashboard to the archive, unsentimentally.
How do we move from a monthly spreadsheet KPI to an automated one?
Stepwise: definitions nailed down first (what exactly counts as a sale or an active customer — half the project's value sits here), then sources connected — ERP, invoicing, CRM, bank — to a dashboard tool with scheduled refresh. The result: this morning's figures every morning, and nobody 'does the report' anymore.
Let’s talk about your project
Message us on WhatsApp or send an email — you talk directly to a developer.
office@northdan.com · +40 752 070 247