KPIs and KGIs almost always appear in a company’s marketing activities. Both have important roles as management indicators, but many people may not understand the difference between them.
In this article, we will explain the definition and setting method of KPI and KGI, as well as indicators such as KSF and OKR.
Please take a look if you are in charge of strategy planning in the marketing department.
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Definition: KPI is the “intermediate indicator” and KGI is the “final goal”
KPI is an acronym for “Key Performance Indicators,” and in Japanese it means ” Key Performance Indicators .” KPIs refer to ” intermediate indicators ” for the ultimate goals set by a company, department, or team.
To put it simply, a KPI is a “goal for achieving a goal”. If the final goal is too ambitious, it becomes difficult to know where to start, but by setting KPIs, it becomes clear “what should be done now” and you can aim for the final goal step by step. It will look like this.
KGI is an acronym for “Key Goal Indicator,” which in Japanese means `Key Goal Indicator .” KGI refers to the ” ultimate goal/goal ” that should be achieved, and the “ideal state” that is the reason for next year’s sales and the creation of the company/team is set in KGI.
The image is that the destination that comes after achieving the KPI, which is an intermediate goal, is the achievement of the KGI.
By setting KPIs and KGIs, you can verbalize your current problems and vague goals. For example, if you have a goal of “I want to increase the sales of my company,” you can think about “How much do you want to increase sales?” and “Why do you need to increase sales?” and set KPIs and KGIs to help you achieve your goal. It becomes easier to take action.
In addition, clearly stating the goal in words creates a “common understanding among the team” and can be expected to have the effect of determining the direction.
KPI is set by calculating backward from KGI.
Be sure to set KGI before setting KPI. Since KGI is the final goal and KPI is an intermediate indicator, it is necessary to set KPI by calculating backward from KGI. If you set KPIs first, you may end up setting intermediate indicators that are unrelated to your goals.
When setting KGI, which is the final goal, consider things like “What do I need to do to achieve it?” and “What number should I increase to get closer to the final goal?”
By the way, there is more than just one KPI setting. Since multiple intermediate indicators must be cleared, it is effective to set them with MECE (no leaks and no duplication) in mind.
How to set KPIs and KGIs to grow human resources and organizations
Even if you understand the key points of setting KPIs and KGIs, many people may be worried that they do not know how to proceed when setting them up. This section introduces specific methods that are useful for setting KPIs and KGIs.
Clarify the current problem to be solved or the corporate philosophy and raise KGI
First, clarify the basic goal to be achieved and set the KGI. KGI mainly includes things that are lacking in the current company/team and desired sales.
It is preferable to state something that is verbalized and quantified, such as “increase the contract acceptance rate from 5% to 10%” or “achieve sales of 10 million yen in the next fiscal year.” If the KGI is clear, it will be easier to imagine what needs to be done to achieve the KGI, and it will be easier to set the KPI.
Therefore, when setting up a KGI, be sure to reconsider the current problems, the goals coming down from upper management, the company’s philosophy, etc.
Assemble KPI settings keeping in mind “SMART”
The “SMART model” is a framework that is useful when setting KPIs.
The SMART model consists of five elements: Specific, Measurable, Achievable, Relevant, and Time-bound. It is taken from the initials of Make sure to set KPIs that satisfy these five items.
The details of each are summarized below.
| item | detail |
| Specific | Anyone can understand it. Be specific and clear. |
| Measurable | Achievement can be measured. Quantified. |
| Achievable | It is not an ideal or wish, but realistically achievable. |
| Relevant (relevance to the final goal) | It is not ad hoc and is closely related to KGI. |
| Time-bound (clear deadline) | There is a clear deadline for achieving the goal. |
The trick to setting KPIs is to set clear deadlines.
If you don’t set clear deadlines for your goals, you will end up putting off achieving them, leading to situations such as “it takes a long time to achieve them” and “you forget the KPIs you set.” To prevent this from happening, when setting KPIs, be sure to decide when they can be achieved (deadline).
It is also a good idea to discuss with the person setting the KPIs (subordinates or team members) and decide when they can be achieved.
Advantages of setting KPI/KGI
We have explained the importance of KPIs and KGIs, but what are the benefits of setting KPIs and KGIs?
Here, we will explain the specific benefits of setting KPIs and KGIs.
Goals can be clarified and the direction of the team can be determined.
By setting KPIs and KGIs, the goals become clear and the direction in which the organization/team should move is determined.
As a company, setting goals is inevitable. However, setting unrealistic goals will not create a sense of unity as a team.
By setting achievable and challenging KPIs, you can clarify what needs to be done and maximize your team’s performance.
It also makes it easier to envision what needs to be done to achieve KPIs and allows you to take action in line with your goals.
Visualize progress toward goals and make it easier to manage
By setting KPIs and KGIs, the progress toward goals can be visualized, making management easier. If the KPIs are vague, members will be confused about what they should do, and managers will not know what criteria to use for evaluation.
For example, setting abstract goals such as “new business development” or “improvement of productivity” does not provide concrete evaluation criteria.
By setting specific numerical goals, such as “promote work efficiency and increase task completion rate by 10%” or “acquire 30 or more new leads per week,” the degree of achievement becomes clear. , members can move without hesitation.
Able to prioritize and act
Many people have had the experience of not being able to prioritize their work and have stopped working because they had so many things to do that they didn’t know where to start.
By setting KPIs and KGIs, it becomes easier to prioritize work. By creating an environment where employees prioritize work that is in line with their goals over work that does not lead to goal achievement, they can efficiently focus on important tasks that are directly linked to the company’s profits.
Maintaining member motivation
People are most likely to concentrate when it is clear what they need to do. It’s because the deadlines and tasks you need to complete are clear that you try to concentrate and get through it. In other words, appropriate KPIs and KGIs contribute to maintaining member motivation.
However, unrealistic KPIs and KGIs can reduce motivation, so it is important to set them appropriately, taking into account the abilities and expectations of the members.
What is KSF/OKR? Explanation of related keywords you should keep in mind
In addition to KPI and KGI, there are also KSF and OKR, which are indicators that are often confused. We will explain the details of each below, so be sure to read them carefully.
What is KSF?
KSF (Key Success Factor) is an important success factor. It is used to identify the necessary factors to achieve your company’s goals. They are often confused with KPIs, but unlike quantitative KPIs, KSFs are qualitative and cannot be quantified.
For example, a KSF is to “increase the product menu to increase the cross-sell order rate by 130%.” KSF is a necessary element for achieving objectives, and it is recommended to identify it before thinking about specific KPIs.
What is OKR?
OKR (Objectives and Key Results) refers to goals and main results. OKR is a goal management method that is characterized by frequently setting, tracking, and reevaluating goals.
For example, divide your goals into months and set specific numerical indicators to measure success for each. Based on this, scores are given and employees are reevaluated.
The benefits of OKRs include:
- Rapid development and easy review: The goal cycle is short, so progress can be made quickly. Can be changed and adjusted according to progress status
- Goal setting does not take time: OKR goals are assumed to be simple, so goal setting does not take time and can be implemented immediately.
- It is easy to maintain motivation because you focus on your goal: Since you work specifically on one goal, your concentration increases and you can maintain your motivation to work on it.
In today’s world where times change rapidly and it is difficult to know what the right answer is, long-term plans often do not go well, so it is important to repeat planning, execution, and evaluation quickly in short cycles. For this reason, OKRs are attracting attention as a method that is relevant to the times.
Summary: Use KPIs and KGIs to clarify goals
In this article, we have explained the overview of KPI and KGI, the differences between them, and points on how to use them.
Goals are essential in business management. By clarifying your specific goals, you will be able to determine the direction in which you should aim, and setting vague goals can lead to a decrease in motivation.
Regardless of company size, organizations that continue to grow always have clear KPIs and KGIs. It is no exaggeration to say that setting high-quality KPIs and KGIs determines the success of a business.
Why not take a look at your organization’s KPI / KGI settings based on the content introduced this time?
If you have any trouble designing KPI / KGI, please feel free to contact Pantograph.
At Pantograph, we provide all kinds of support, from problem identification to planning proposals, for strategic planning centered on Internet business.
Consultations are free, so please feel free to contact us.
