Key Performance Indicator (KPI)

Contents:

Examples:

What is a KPI?

A key performance indicator (KPI) is a type of performance measurement.

A KPI evaluates the success of an organization or activity.
Choosing the right KPIs needs good understanding of what is important to the organization.

Success examples:

Repeated periodic achievement of an operational goal, such as 100% customer satistfaction, or zero defects, etc.
Making progress toward strategic goals.

Wikipedia pages:

Our related guides that use KPIs:

To define a KPI, you can cover these areas:

Title: use an exact name to avoid ambiguity
Objective: the relation of the indicator with the organizational objectives must be clear
Scope: state the areas of business and/or parts of the organization that are included and/or excluded.
Target: Benchmarks must be determined in order to monitor progress
Formula: the exact calculation of the indicator
Units: what is/are the unit(s) of measurement in use
Frequency: when is the indicator recorded and reported
Data source: the exact data sources involved in calculating a indicator value
Owner: the accountable person for the indicator
Comments: any outstanding issues regarding the indicator

To improve a KPI, you can ask these questions:

Does it clearly define what constitutes success?
Does it clearly relate to a strategic objective and key result (OKR)?
Does it provide the information required to set SMART goals?
Does it accurately portray progress and probability of achieving both long-term strategic objectives and near-term milestones?
Does it identify the root causes of barriers?
Does it focus the organization on the priority improvement needs?
Does it drive the behavior and actions required to achieve the objectives?
Does it align work with value?

Quantitative indicators: can be presented with a number.
Qualitative indicators: can't be presented as a number.
Leading indicators: predict the outcome of a process
Lagging indicators: present the success or failure post hoc
Input indicators: measure the amount of resources consumed during the generation of the outcome
Process indicators: represent the efficiency or the productivity of the process
Output indicators: reflect the outcome or results of the process activities
Practical indicators: interface with existing company processes.
Directional indicators: specifying how something is changing, such as getting better or worse.
Actionable indicators: sufficiently in an organization's control to effect change.
Financial indicators: used in performance measurement and when looking at an operating index.

A Key Leading Indicator (KLI) is a KPI that tends to show up earliest.

A Key Performance Measure (KPM) is how you measure a KPI.

There is overlap between a measure and a metric.

A measure is concrete, usually measure one thing, and are quantitative in nature (e.g. I have five apples).
A metric describe a quality and require a measurement baseline (I have five more apples than I did yesterday).

Examples:

A measure can be useful for demonstrating workloads and activity
A metric can be useful for evaluating compliance, processes effectiveness, and measuring success against established objectives.

KPIs help lead as well as manage. KPIs are more than just “numbers to hit”, they are metrics that help leaders anticipate the future and develop informed business plans.
KPIs align the organization. Selecting the right KPIs gets everyone in the organization on the same page, with both people and processes aligned to better serve customers’ needs.
KPIs provide an integrated view of the customer. Framing KPIs around awareness and anticipation of customer needs enables firms to engage customers at various touchpoints.
KPI components inform decision-making. Organizations with the capability to analyze KPI data in real-time are better positioned to adjust priorities than organizations that can only conduct a retrospective analysis.
KPI data is shared across business units. Success depends on cross-functional collaboration. Data visibility plays an important part in this collaboration, as managers need to see how their actions impact KPIs.
KPIs aren’t allowed to proliferate indiscriminately. There is no “magic number” of KPIs, but fewer is generally better: focus on KPIs that drive business growth, such as 3 enterprise KPIs and 3 functional KPIs.
KPIs serve as data sets for machine learning. KPIs can “teach” machine learning models in order to improve performance over time. This allows models to input transactional data, then solve for long-term values.