Categories of KPIs
Most KPIs fall into four different categories with each category having its own characteristics, timeframe, and users.
Strategic KPIs are usually the most high-level. These types of KPIs may indicate how a company is doing, although it doesn't provide much information beyond a very high-level snapshot. Executives are most likely to use strategic KPIs, and examples of strategic KPIs include return on investment, profit margin, and total company revenue.
Operational KPIs are focused on a much tighter timeframe. These KPIs measure how a company is doing month-over-month (or even day-over-day) by analyzing different processes, segments, or geographical locations. These operational KPIs are often used by managing staff and are often used to analyze questions that are derived from analyzing strategic KPIs. For example, if an executive notices company-wide revenue has decreased, they may inquire as to which product lines are struggling.
Functional KPIs hone in on specific departments or functions within a company. For example, the finance department may keep track of how many new vendors they register within their accounting information system each month, while the marketing department measures how much clicks each e-mail distribution received. These types of KPIs may be strategic or operational but provide greatest value to one specific set of users.
Leading/Lagging KPIs describe the nature of the data being analyzed and whether it is signaling something to come or signaling that something has already occurred. Consider two different KPIs: the number of overtime hours worked and the profit margin for a flagship product. The number of overtime hours worked may be a leading KPI should the company begin to notice poorer manufacturing quality. Alternatively, profit margins are a result of operations and are considered a lagging indicator.