Key Performance Indicator (KPI)
- What is a KPI?
- How to define a KPI
- How to improve a KPI
- KPI vs. KLI vs. KPM
- Measure vs. metric
- Credits and links
- Business process
- Service level agreements (SLAs)
- Service quality
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.
- Repeated periodic achievement of an operational goal, such as 100% customer satistfaction, or zero defects, etc.
- Making progress toward strategic goals.
Our related guides that use KPIs:
How to define a KPI
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
How to improve a KPI
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.
KPI vs. KLI vs. KPM
A Key Performance Indicator (KPI) is the top-level concept in this guide.
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.
Measure vs. metric
There is overlap between a measure and a metric.
A measures are 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).
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.