---
title: "What is KPI?"
description: "KPI is an evaluation index for defining corporate goals."
url: https://help.flow-insight.com/en/articles/11-what-is-kpi
collection: "KPI glossary"
updated: 2026-08-06
language: en
alternates: [ja]
---

# What is KPI?

KPI is an evaluation index for defining corporate goals.

KPI is short for "Key Performance Indicator" — an indicator for measuring how well an organization is progressing toward its goals.

A KPI is generally a related factor turned into a number, used to help achieve a company's KGI (Key Goal Indicator). Put another way: hit your KPIs consistently, and your KGI follows naturally.

Most retail stores set their KGI as hitting a sales budget (in yen), and set sales-related indicators — Traffic, Average Purchase, Conversion, and similar — as their KPIs.

## Benefits of setting KPIs

Setting KPIs gets you the following benefits:

1.  **Clarifies action** — Just saying "grow sales 30% year over year" doesn't tell store employees what to actually do. A KPI gets everyone acting with the same shared understanding.
    
2.  **Clarifies the process** — A KGI alone can leave employees unsure whether their actions are working, which hurts performance. A KPI clarifies the path to the goal and lets people adjust their actions as needed.
    
3.  **Surfaces issues** — Clarifying issues is essential to improving operations. Anything blocking a KPI target becomes a clear issue, making it easier to spot what to improve.
    
4.  **Establishes an evaluation standard** — Since a number reads the same to everyone, it can double as an evaluation standard — unifying evaluation around KPIs lets you assess performance fairly, based on the numbers.
    

## How to set KPIs

The single most important factor when setting a KPI is whether it's linked to achieving your KGI.

This matters especially for physical stores, where the conditions needed to hit a KGI shift constantly with the external environment. The right KPIs make it easier to see which factors are changing and how they're affecting your KGI.

Here's an example from a retail store with a sales-budget KGI: sales came in ¥500,000 short of budget, missing the KGI.

Breaking the shortfall down by the KPIs that make up sales — Transactions and Average Purchase — Transactions were on target, but Average Purchase was down ¥500.

Breaking Average Purchase down further: Unit Per Transaction was above target, but Average Item Price had dropped ¥500.

This is how identifying the indicators tied to your KGI lets you set and evaluate the right KPIs.

## Keys to achieving your KPIs

1.  **Build a plan** — Once your KPIs are set, build a rough plan toward your KGI. Since real-world conditions shift constantly, treat the plan as a reference based on past trends rather than a fixed roadmap.
    
2.  **Evaluate regularly** — Check both KGI and KPI progress regularly. A common mistake: your KGI (e.g. sales budget) is tracking well overall, but you fixate on one underperforming KPI anyway. Remember a KPI is just one input into your KGI.
    
3.  **Act immediately when you spot something to improve** — Regular evaluation will surface gaps from your original plan. When you find a factor affecting your KGI, act on it right away — and don't hesitate to loop in your manager if a call is hard to make alone.
    

## Wrapping up

KPIs are an important indicator for your company's growth. Using them well significantly improves your odds of hitting your goals. We hope this helps.

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If you have any questions or feedback, please contact support at [support@flow-solutions.com](mailto:support@flow-solutions.com).