What is KPI? Meaning and How to set KPIs

Categories CRM

How to set KPIs

What are KPIs anyway? What are KPIs, and how can they be used to achieve goals?

In order to ensure the survival of the company, the top management of the company presents a goal (KGI = Key Goal Indicator) to the employees at the beginning of the year, such as “ We will make 10 million dollars in profit this year.”

In response, the employees break down the goal of 10 million dollars in profit into elements that can be measured numerically (unit price x number of customers x order probability, etc.).

These values are called KPIs.

Here, I will introduce the meaning, importance, and effect of KPIs, KPIs in sales activities, CRM/SFA, etc., which are effective means for achieving KPIs.

Table of contents:

  • What is KPI?
    • What is necessary for setting KPI?
    • Difference between KPI and KGI
  • How to set KPIs
    • KPIs to be set
    • Numerical values alone are not effective
  • Setting KGI
    • Identify quantifiable sales activities
    • Set what your salesperson can move
    • Keep the number of KPIs to the minimum
  • KPIs for sales activities that you can use now
    • Number of sales opportunities
    • Number of CVRs of prospective customers
    • Number of sales projects
    • Price per customer
    • Order period
  • Achieve your goals with KPI management: Four key points to keep in mind
    • Review employee behavior patterns with KPI management
    • Visualization in KPI management
    • KPI management is a team effort
  • Use CRM and SFA to visualize sales activities
    • CRM
    • SFA?
    • Effects of CRM/SFA implementation
    • Key points to keep in mind when implementing CRM/SFA
  • Summary

What is KPI?

KPI is an abbreviation for Key Performance Indicator.

KPIs are intermediate indicators set up to check whether the company is making steady progress toward achieving its goals by identifying several factors necessary to achieve KGI, the final target, and are expressed in concrete numerical values.

What is necessary for setting KPI?

When setting KPIs, it is necessary to compare and analyze past figures for each factor, find improvement points, and set your targets.

It is also necessary to review and correct the specified KPIs if they are not appropriate. The period should be short, weekly, or monthly, while KGI should be longer, such as one year or three years.

KPIs have been adopted not only by companies but also by governments.

Difference between KPI and KGI

The two indicators, KPI and KGI, are often confusing but note that they are clearly defined differently.

Both are the same in terms of setting quantitative numbers but for different purposes.

KGI is an abbreviation for Key Goal Indicator, which translates to the management goal achievement index. KGI is an indicator of what constitutes an achievement in a company's business activities.

Specifically, it refers to the ultimate goals for a certain period of time, such as "sales of X million dollars," "profit margin of X%," and "market share of X%," which companies aim for in their mid-term management plans.

As explained at the beginning of Chapter 1, KPI is an intermediate numerical index for achieving KGI, the final goal.

If you set an indicator as KGI that should be treated as a KPI, the company may move in the wrong direction.

For example, if you set the number of sales visits as a KGI when the original goal is to increase sales, you may end up with an increase in the number of useless visits that do not lead to increased sales.

It is necessary not to confuse KGI and KPI and carefully examine KGI at first.

How to set KPIs

When setting KPIs, you need to consider the following six items:

KPIs to be set

As mentioned above, KPIs are intermediate indicators of the factors necessary to achieve KGI and are concretely quantified.

These vary by industry and by location, whether the customer is a company or an individual.

The numbers must be feasible and motivating to employees. If you set a target too high, employees will feel like giving up from the beginning. That will lead to a decrease in the motivation of the entire team.

Numerical values alone are not effective

It is not easy to obtain results by only setting up numerical values. Besides that, standardization and visualization are necessary.

For this purpose, the following is necessary:

Determine who is in charge and clarify their responsibilities

If you don't do this, you may end up relying on others, thinking that someone else will do it, and no one will.

Clearly define deadlines and manage progress

If you don't set a deadline, months will pass unnecessarily, and it will be hard to get results and accomplishments forever.

Create a business procedure that describes the steps and contents of the work so that anyone can do it

If someone takes paid leave, nursing care leave, or maternity leave, and that person is the one who is in charge, KPI will stop there. Even in such cases, a procedure manual is necessary so that anyone can do it.

The ideal situation is to break down the workflow in detail and create a procedure manual, so that anyone can follow the procedure manual and perform their work to achieve the KPI.


It was around 1998 that the word "visualization" became known to the world. Since then, this term has come to be used in various production sites, other industries, businesses, daily life, etc.

Visualization is the transparency of the information so that anyone can see it.

For example, by using graphs and tables, you can grasp the business flow more intuitively.

To visualize KPIs, CRM/SFA is effective.

Setting KGI

KGI is an abbreviation for Key Goal Indicator. It is an indicator or numerical value that quantitatively expresses the final goal that a company or other organization should achieve, rather than an abstract philosophy or purpose.

For example, "Let's increase sales to 1 million dollars in one year" is a concrete numerical representation of the objective.

As a concrete example of KPI and KGI in sales, if you set your KGI as "Let's achieve sales of 1 million dollars in two years", your KPI may be "Let's visit 500 customers, acquire 50 new customers, and close 20 deals in the current fiscal year".

When deciding KPIs based on these KGIs, it is necessary to think about CSFs.

CSF is the abbreviation for Critical Success Factor, which translates to key success factors. It refers to the factors that have a significant impact on achieving the target KGI.

For example, if the KGI is "to increase sales to 10 million dollars in two years," the CSFs could be "increase the number of customers" or "improve sales techniques. Then, you think about the KPI factors in response to this.

In this way, in order to achieve the final target KGI, it is important to consider and execute KGI, CSF, and KPI as a trinity.

Identify quantifiable sales activities

Next, you need to find out what can be quantified. Here, I will describe sales activities as an example.

"Let's do our best today" or "Explain it to customers so that they can understand" does not affect salespersons to achieve business results.

However, it is when only you can set a target in numerical values such as "How many customer visits do you want" or "Increase monthly sales to 10 million", and you can do your best.

The following are some examples:

  • Number of appointments obtained
  • Unit price per order
  • Number of cancellations
  • Number of company brochures and other materials submitted
  • Number of quotation requests received or sent
  • Number of contracts closed
  • Collection rate
  • Number of complaints

Set what your salesperson can move

When setting KPIs, you need to set numbers that are determined by the activities of salespeople.

For example, determine the number of visits by the efforts of the salesperson and the closing rate by sales techniques. 

Determine the profit margin of the product by the company, not by the activities and efforts of the salesperson.

Minimize the number of KPIs

If you set many KPIs with the idea of "making sure to achieve KGI," the salesperson will be confused.

Therefore, it is necessary to set the minimum number of KPIs so that salespeople can effortlessly operate, manage, and be motivated to achieve their goals.

Usually, three is a good number. It is better to keep the number of KPIs to five at most, so that there is less confusion in the field and it is easier to manage on a daily basis.

If you have too many KPIs and the workload on the front-line increases, you will end up with a bad situation. It is important to identify the KPIs that are truly important.

KPIs for sales activities that you can use now

This section introduces KPIs that you can use in sales activities.

The following five are listed below:

Number of sales opportunities

Naturally, in order to improve your sales performance, you need to have opportunities to interact with customers.

However, the number of opportunities here is not just the number of times you visit the customer, but the number that leads to a future contract, such as the customer showing interest, the customer asking about the product, or the customer submitting a quotation.

Number of CVRs of prospective customers

The next important thing is the CVR (Conversion Rate), which is the ratio of the number of closed deals to the number of potential customers.

If the number of prospective customers is 100 and the conversion rate is 1%, the number of closed cases is 1. On the other hand, if the number of visits is 50, but the closing rate is 2%, the closing rate is also 1.

Thus, if you set only the number of potential customers as a KPI and do not set the number of CVRs, you will not be able to evaluate your sales performance properly.

Setting the closing rate as a KPI will also help improve the skills of each salesperson.

Number of sales cases

The number of sales deals that each salesperson is responsible for is also important.

The basic idea may be to distribute the number of sales projects equally to each salesperson. One way to do this is to vary the number of cases according to the number of years of experience and differences in sales techniques or to have a pair of experienced and inexperienced salespeople.

The reason is that experienced people can increase the number of CVRs by focusing on important aspects of the business, and inexperienced people can learn the basics of sales from experienced people and receive so-called on-the-job training, which leads to the improvement of sales techniques from inexperienced people.

Price per customer

It is also effective to set unit price per customer as a KPI.

For example, the difference between selling ten products with a gross margin of 10,000 dollars and selling one product with a gross margin of 500,000 dollars is 400,000 dollars, even if the number of contracts is the same.

Handling products and services with high gross profit margins will also lead to more efficient sales activities.

Since your business time is limited, you can maximize your sales per hour by increasing the price per customer.

Let's incorporate this into our KPI.

Order period

The time and order period between the time they start visiting the customer and the closing is also an important factor.

For example, if you can win an order in 11 months instead of 12 months, the efficiency will increase by about 9%, and the effect will be great.

Achieve your goals with KPI management: Four key points to keep in mind

This section explains four key points that are essential for achieving goals using KPI management.

Review employee behavior patterns with KPI management

The values of the KPIs you set will not be constant, as they will change depending on the actions of your salespeople, the situation of your customers, and the movements of your competitors.

You need to know how the values are changing, analyze the causes of the changes, review values, and in some cases, change them to appropriate ones and review the behavior patterns of employees accordingly.

In this way, KPI management means considering various things, adjusting related matters, and taking necessary measures to obtain the targeted KPI values.

Visualization in KPI management

As mentioned earlier, visualization allows employees to know the current KPIs at a glance.

Visualization is very important for KPI management because it enables employees to identify problems, think about countermeasures, and take action.

Visualizing KPIs not only for managers but for all employees makes it easier to work as a team.

Use continuous PDCA for KPI management

As mentioned earlier, the values of KPIs change.

The implementation of KPI management must be done through the PDCA (Plan: Planning, Do: Do, Check: Evaluation, Action: Improvement) cycle. And it is important not to finish this once, but to continue doing it many times.

KPI management is a team effort

KPI management is not something that should be done by one person but by all employees. It is important to share the KPI values with all employees and achieve the desired results.

When sharing KPIs with everyone, it's important to praise people with good KPIs, not criticize those with poor KPI numbers.

It's also a good idea to incentivize people with better KPI completion rates.

On the other hand, it is important not to get angry with people with poor achievement rates but to thoroughly find out what is wrong due to the cause and lead to improvement.

Use CRM and SFA to visualize sales activities

Visualization of sales activities is indispensable for KPI management. In order to visualize sales activities, use CRM and SFA.


CRM is an abbreviation for Customer Relationship Management.

It is a management technique that collects and analyzes customer information to make optimal and efficient approaches to improve the competitiveness of your products and services.

Specifically, all departments that have the opportunity to interact with customers can share and manage customer information and contact history, which will enable them to respond to inquiries and problems, build closer and better relationships with customers, and increase customer satisfaction.


SFA is an abbreviation for sales force automation, which is translated as sales support system.

SFA is an information system or software used by companies to support their sales activities and improve business efficiency. It records and manages existing and prospective customers related to sales activities and lists and edits negotiation history, progress of current projects, necessary information obtained through sales activities, and schedules such as appointments and deadlines.

Effects of CRM/SFA implementation

The CRM/SFA system, which is a combination of CRM and SFA, can do a wide range of things, and the following effects are expected from the implementation of this system:

  • Manage customer information and sales information
  • Improve customer satisfaction
  • Accumulation and sharing of know-how
  • Improve sales efficiency by visualizing sales activities
  • Expected to improve sales and organizational skills and increase productivity
  • Standardize the sales process, which is too individualistic and disjointed
  • Smooth information sharing within and between departments
  • It will lead to increased sales

Key points to keep in mind when implementing CRM/SFA

Some people say it is difficult to handle or do not understand well after implementing the CRM/SFA system. To prevent this from happening, you should keep the following in mind when implementing CRM/SFA.

There are many CRM/SFA system providers, each with different functions

CRM/SFA system providers differ in the content and format of input, output, and customer information that can be input, and each system has its own characteristics.

Obtain information from the system company before purchasing

Create a Request for Information (RFI) that describes what you expect from the system, present it to the system company, and get their response.

It is also important to know how to maintain the confidentiality of personal information, deal with system failures, and what backup systems are in place. It is also necessary to inform them of the OS of the computer you are using.

Demonstrate using actual data and compare the pros and cons

After narrowing down the candidates to a few companies, have a representative from each system provider come to your office to input your actual data and check the output. From there, you can learn about the simplicity, convenience, and content displayed and choose the system company that best suits your needs.

Create your own operating procedures

The operating procedures provided by system providers are generally detailed, difficult to read, and contain a lot of content, some of which are not necessary for you. And some of your members may be allergic to computers. Let's make it easy to input and view the data they want to know freely and easily. For this purpose, let's make your own hand-made operation manual.


What do you think?

As I have explained so far, KPIs are an effective way to solve problems in a company.

However, it is the employees who will drive the system. Some of them may be reluctant to implement a new system.

The most important thing is to make sure that employees know that KPIs are effective in solving problems.

To this end, before implementing KPIs, fully explain the significance of their implementation, their effectiveness, the work required, examples of successes and failures, and so on.

KPIs are useful for achieving your goals. I hope you will implement KPI systems as soon as possible, and all employees will actively use them, thereby raising awareness, increasing the workplace atmosphere, and achieving our goals.

See also:
Reasons for Failure in Implementing CRM Tools
Open Source CRM Software and Tools
Customer Relationship Management Tools / CRM Software
CRM System
Advantages and Disadvantages of CRM

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