What is a KPI? Guide with Examples for SMEs
A KPI is the number management reacts to when things are going in the wrong direction. Here you'll find the definition, concrete KPI examples for Danish SMEs, the difference between leading and lagging indicators — and a method for setting up a set that is actually followed up on.
Published · Updated · 8 min read
In short
- KPI stands for Key Performance Indicator: a measurable number that shows movement towards a goal.
- A useful KPI has a definition, frequency, target level, and a named owner.
- Combine leading and lagging indicators so problems are detected before the financial statements.
- 8-12 KPIs at the management level are enough — typically 1-3 per strategic goal.
What is a KPI?
KPI stands for Key Performance Indicator. It is a single, measurable number that shows whether you are moving towards a goal. The word 'key' is the most important part of the abbreviation: a KPI is not an arbitrary number from the accounting books, but the number management would react to if things were going in the wrong direction.
A KPI always consists of four parts: a definition (what exactly are we measuring), a frequency (how often), a target level (what is good enough), and an owner (who acts when the number deviates). If one of these parts is missing, the number becomes reporting instead of management.
A distinction is made between leading and lagging indicators. Lagging KPIs such as revenue and earnings show the result after it has occurred. Leading KPIs such as number of offers, delivery time, and employee turnover show early on whether the result is on its way. A useful set includes both types.
KPI Examples for Danish SMEs
Choose a few KPIs per area and keep them for at least four quarters so that trends can be read. The examples can be used directly as a starting point.
Finance
Lagging
Shows the result of the strategy, but reacts late.
Examples: Revenue growth in %, gross margin, EBIT margin, average order size, debtor days.
Customers
Mixed
Captures whether customers stay, buy more, and recommend you.
Examples: Customer retention in %, NPS, share of revenue from service agreements, hit rate on offers, number of new customers per quarter.
Processes
Leading
Measures delivery — problems are discovered here first.
Examples: Delivery precision in %, lead time in days, error and complaint rate, capacity utilization, number of revisits per task.
Employees and Development
Leading
Monitors the capacity on which the strategy depends.
Examples: Employee turnover in %, absenteeism, percentage of employees with completed certification, well-being score, time to fill a position.
Useful KPIs vs. Poor KPIs
The difference rarely lies in the topic, but in how precisely the number is defined — and whether anyone can act on it.
| Area | Poor KPI | Useful KPI |
|---|---|---|
| Sales | “Better sales” | Hit rate on submitted offers, measured monthly, target 35%, owner: sales manager. |
| Customers | “High customer satisfaction” | Percentage of customers with active service agreement, measured quarterly, target 60%. |
| Operations | “Efficient production” | Delivery precision (orders delivered by agreed date), measured weekly, target 95%. |
| Employees | “Good well-being” | Employee turnover rolling 12 months, target below 12%. |
| Strategy | “Digitalization” | Percentage of orders received digitally, measured monthly, target 70% by year-end. |
How to Set Up a KPI Set in Five Steps
1. Start with the strategic goals
Each strategic goal must have 1-3 KPIs that show whether the goal is being achieved. KPIs without underlying goals end up as mere reporting.
2. Define the number precisely
Write down the formula, the source, and what is included in the count. For example, “Revenue growth” must determine whether it includes resale and which period is being compared.
3. Set target level and frequency
Choose a level you need to strive for, but can reach. Measure weekly or monthly for operational figures, quarterly for strategic figures.
4. Assign an owner to each KPI
The owner updates the number and explains any deviation at the review. Without a name on the KPI, no one will be held accountable.
5. Follow up at a fixed cadence
Review KPIs at the same meeting every month or quarter. Only react to deviations — green numbers should not take up meeting time.
Five Mistakes in KPI Work
- Too many KPIs. 25 numbers mean none of them receive attention — 8-12 is enough for an SME.
- Only lagging indicators, so problems are only discovered in the financial statements.
- Unclear definitions, so the number means something different from meeting to meeting.
- KPIs without an owner and without a target level — so the status can be neither green nor red.
- The numbers reside in spreadsheets that are manually updated the day before the meeting.
Spreadsheets vs. Plandura for KPI Tracking
| Area | Spreadsheets | Plandura |
|---|---|---|
| Connection to strategy | KPI sheets without connection to goals. | Each KPI can be linked to a strategic goal, so status rolls up to the goal. |
| Status | Colors are set manually based on intuition. | Green, yellow, red, and “missing data” are calculated based on target level and latest measurement. |
| History | Overwritten or copied to new tabs. | All measurements are saved, so development can be seen over time. |
| Follow-up | No one reminds the owner to update. | Fixed review cadence with an agenda built on actual status. |
Frequently asked questions
What does KPI mean?
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KPI stands for Key Performance Indicator. It is a measurable number that shows whether the company is moving towards a specific goal, and which management consistently follows up on.
What is the difference between a KPI and a goal?
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A goal describes the desired state, e.g., “we want to be the preferred supplier for municipal tenders.” The KPI is the number that shows movement towards the goal, e.g., “hit rate on tenders” with a target level of 35%. A goal without a KPI cannot be followed up, and a KPI without a goal becomes pure reporting.
How many KPIs should an SME have?
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8-12 KPIs at the management level are sufficient for most companies with 10-250 employees, typically 1-3 per strategic goal. Departments can have their own operational figures, but the management's set should be readable on a single screen.
What is the difference between leading and lagging KPIs?
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Lagging KPIs measure the result after it has been achieved — revenue, earnings, customer churn. Leading KPIs measure the behavior that creates the result — number of offers, delivery time, absenteeism. Leading indicators allow action to be taken before the result is lost.
What is the difference between KPI and OKR?
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KPIs are ongoing metrics for how things are going. OKR is a quarterly method with an ambitious goal (Objective) and measurable key results (Key Results) to drive specific change. The two can be used together: KPIs monitor operations, OKRs drive change.
How often should KPIs be updated?
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Operational figures such as delivery precision and hit rate are updated weekly or monthly. Strategic figures are typically updated quarterly. The most important thing is a fixed frequency, so deviations are discovered at the same meeting every time.
Related guides
These guides are closely connected to kpi guide and are natural next steps in your strategy work.
- OKR vs KPI: when to use whichThe difference between ambitious quarterly goals and ongoing metrics.
- Balanced scorecard explainedThe four perspectives and the path from strategy to measurable goals.
- Strategy map: how to build itVisual cause and effect between goals, themes and results.
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