However, not all KPIs are created equal. Some are quantitative, meaning they are based on numbers, data, and statistics. Others are qualitative, meaning they are based on opinions, feedback, and observations.
Quantitative indicators
Chances are when you think of KPIs, you are thinking of quantitative KPIs. These are ones that can be objectively measured as a fixed unit or value. They are often the most common type and reveal clear, concise, and data-based insights about a business's performance.
An entity's performance measures must, where reasonably practicable, comprise a mix of qualitative and quantitative performance measures. In many cases it is expected that an entity will have both quantitative and qualitative performance measures to capture the multiple dimensions of the entity's performance.
Qualitative KPIs measure non-numerical data and are described as "descriptive" characteristics or subjective interpretations of a person's opinions. Qualitative KPIs are typically based on qualitative data and are not measured in numerical terms.
The survey data itself is, of course, quantitative, but the measures are based on a subjective interpretation of a person's opinions. A quantitative KPI is a measurable characteristic – really anything that involves numbers.
Qualitative indicators are not measured by numbers. Typically, a qualitative KPI is a characteristic of a process or business decision. A common qualitative indicator that organizations regularly use would be an employee satisfaction survey.
Qualitative indicators, by definition, measure change over time against specific, predetermined criteria. Unlike their quantitative counterparts, they do not strictly involve enumeration, which allows them to surpass other measurements of analysis as well as provide specific and nuanced information.
Qualitative performance reviews assess employees on subjective criteria that cannot be precisely measured. Behavioral and leadership competencies like “communication” and “initiative” are qualitative since they don't have defined outcomes that equate to success.
Examples of qualitative indicators include – NGO functional capacity; level of participation of women in local governance; involvement in decision making about service delivery; level of employee satisfaction; changes in knowledge and attitudes, etc.
Typical qualitative measurement examples include color, gender, and race. If they cannot be measured in a traditional way, what is a qualitative measurement and how is it measured? Qualitative measurements are taken by categorizing traits into identifiable descriptive terms.
Different types of indicators
One way is to differentiate between quantitative and qualitative indicators. Quantitative indicators are reported as numbers, such as units, prices, proportions, rates of change and ratios. Qualitative indicators are reported as words, in statements, paragraphs, case studies and reports.
Key performance indicators (KPIs) refer to a set of quantifiable measurements used to gauge a company's overall long-term performance. KPIs specifically help determine a company's strategic, financial, and operational achievements, especially compared to those of other businesses within the same sector.
The most effective KPIs are quantifiable, actionable and align with a company's goals and growth stage. Common metrics that matter to most businesses include revenue growth, profit margin, cash flow, employee turnover and customer acquisition cost.
As you can see, KPIs, unlike metrics, carry a degree of subjectivity. They are shaped by the context in which they are being used, and the people or companies who are using them. That's why you may see some companies use completely different KPIs to other businesses.
Qualitative variables are those that express a qualitative attribute such as hair color, eye color, religion, favorite movie, gender, and so on.
Examples of quantitative observation include age, weight, height, length, population, size and other numerical values while examples of qualitative observation are color, smell, taste, touch or feeling, typology, and shapes.
Qualitative observations use your senses to observe the results. (Sight, smell, touch, taste and hear.) Quantitative observations are made with instruments such as rulers, balances, graduated cylinders, beakers, and thermometers. These results are measurable.
Types of KPIs include: Quantitative indicators that can be presented with a number. Qualitative indicators that can't be presented as a number. Leading indicators that can predict the outcome of a process.
Qualitative observation deals with data that can be observed with our senses: sight, smell, touch, taste, and hearing. They do not involve measurements or numbers. For instance, colors, shapes, and textures of objects are all qualitative observations.
What is the definition of qualitative observation? Qualitative observation is a research method in which researchers collect data using their five senses, sight, smell, touch, taste, and hearing. It is a subjective method of gathering information as it depends on the researcher's sensory organs.
Quantitative product metrics
For example, a bakery could track the amount of time that passes between procuring ingredients and selling a loaf of bread, and compare the time each component step takes as well. This might help them identify parts of the production process that could move more quickly or effectively.
KPI analysis starts with connecting to the right data sources, pulling data from Excel all the way to SQL databases. Then to become relevant, the data needs to be prepped for visualization. That means standardized, structured and transformed with for example the inclusion of formulas.
Popular KPI examples include customer satisfaction, employee retention, revenue growth, and cost reduction. KPIs are often measured on a periodic basis, such as monthly, quarterly, or yearly.