How to analyze a Key Performance Indicator



Key performance indicators (KPI) are very important in monitoring the progress of an organization. However, they serve no value or purpose if they are not regularly analyzed. It is the process of taking advantage of what they are showing. And the relevance or value on the quality of the generated data, the skills of the business analysts using the data, and the action they take based on their analysis.

KPI Analysis for Business

On an enterprise level, KPI analysis is conducted with the main goal of ensuring profit growth over time. KPI analysis for a business-driven organization is complicated and challenging; thus, the analyst has to carefully understand the data and avoid even the slightest mistakes. The success of a KPI analysis depends not only on the analysts involved and the process involved. It is important that the analysts use the right tools in drawing up conclusions. In these modern times, it can be said that it is even mandatory that KPI analysts use technology and software in order to analyze data.

How to Conduct a Good KPI Analysis

A good KPI analysis starts with getting the correct data sources, organizing them in Excel form and then pulling out the correct software tools. In order for the data to become relevant, they have to be shown through a visualization tool, usually a chart or graph. The data have to be structured, standardized and transformed into something more understandable and concise, such as the use of formulas. Only then can the business metrics be shown visually and ready for analysis.

The compiled data is better analyzed when shared with other analysts for collective participation. The software for KPI analysis must allow the capability of receiving comments or feedback from others on each of the KPIs under analysis. This way, each business stakeholder can contribute to the understanding and analysis of the data. After all, KPI analysis is found to be most effective when there is a collective effort. Once the KPI data is properly compiled, it is more useful when shared with different levels of an organization in order to gather more comments and reactions. It will also be more helpful for the organization to make sound and informed business decisions.

An important factor in analyzing KPI data is the team that will analyze it. As mentioned, good KPI analysis depends on the data and the skills of the analysts. People are often misled with the notion that KPIs are just for management use. However, KPI analysis is also a way of connecting the organization’s employees to the organization’s objectives. KPI analysis may be conducted on multiple levels, with the first level taking into account the comments and reactions of the concerned departments of the organization. At the second level, the business analysts could come in and take over after taking into account the initial feedback from the departments of the organization. This supports the idea that KPI analysis is more effective when there are collaboration and participation.