Key Performance Indicators Definition

KPIs assist an organization to define and measure progress toward organizational goals and
objectives. Once an organization has analyzed its mission and defined its goals, it needs to
measure progress towards those goals. KPIs provide a measurement tool. In many cases, KPIs
are used in projects and to measure service delivery. KPIs may be used to measure that services
meet agreed delivery times in accordance with a Service Level Agreement.
Key Performance Indicators Characteristics
A KPI should be:
Relevant : Relevant to & consistent with the specific organization's vision, strategy & objectives.
Focused on organization wide strategic value : KPI should Focused on organization wide
strategic value rather than non-critical local business outcomes. selection of the wrong KPI can
result in counterproductive behavior and sub optimized outcomes.
Representative – appropriate to the organization together with its operational performance;
Realistic – fits into the organization's constraints and cost effective; specific – clear and focused
to avoid misinterpretation or ambiguity;
Attainable – requires targets to be set that are observable, achievable, reasonable and credible
under expected conditions as well as independently validated;
Measurable – can be quantified/measured and may be either quantitative or qualitative;
Timely – achievable within the given timeframe;
Understood – individuals and groups know how their behaviors and activities contribute to
overall organizational goals;
Agreed – all contributors agree and share responsibility within the organization;
Reported – regular reports are made available to all stakeholders and contributors;
Governed – accountability and responsibility is defined and understood; and
Resourced – the program is cost effective and adequately resourced throughout its lifetime.
Top 15 Most common questions we get on KPI's
1. What does KPI stand for? : KPI stands for key performance indicator.
2. What is a KPI : A KPI is a measurable value that demonstrates how effectively a company is
achieving key business objectives.
3. What is a KPI used for ? : KPIs are used by individuals and organizations to evaluate their
success at reaching critical targets. High-level KPIs may focus on the overall performance of the
enterprise, while low-level KPIs may focus on processes within departments.
4. How do I develop KPIs : We recommend the SMARTER approach. SMARTER stands for
Specific, Measurable, Attainable, Relevant, Time-bound, Evaluate and Reevaluate.
As you create an initial list of values that best demonstrate progress toward key business
objectives, ask yourself and/or your team the following questions about them: Is your objective
Specific? - Can you Measure progress towards that goal? - Is the goal realistically Attainable? -
How Relevant is the goal to your organization? - What is the Time-frame for achieving this goal?
- How and when will you Evaluate short-term progress? - How and when will you Reevaluate
longer-term progress.
5. Who determines KPIs : KPIs are used by individuals, for example, to pursue health-related
goals, and they are used by organizations to pursue business goals. Within businesses, there are
typically departmental KPIs such as those for marketing, sales and customer support. These KPIs
are often established by the departmental leaders, and the departmental managers then ensure
the team is aligned and working accordingly. Then there are the overarching KPIs, typically set
by the organization's CEO and executive team. The departmental KPIs should be created in such
a way that their sum result moves the needle for the overarching KPIs.
7. Which KPI should I use : There is no such thing as a "best KPI." There is only the best KPI for
your particular goals. Determine which goals are most important to you, your team and/or your
company, and run it through the SMARTER .
Top 15 Most common questions we get on KPI's
6. How do I create a KPI: Here’s how you might define the KPI: What: To increase book sales by
15% this year. Why: Achieving this target will allow you to hire another agent. Measure:
Progress will be measured as an increase in number of books sold and resulting revenue. How:
Drive traffic through a blog focused on topics related to our publishing niche. Who: The Content
Marketing Manager will be responsible for this KPI. Outcome: Book sales will have increased by
15% this year. When: KPI progress will be reviewed on a monthly basis.
8. When KPI should I use : Use a KPI when you need to track progress toward a goal over time.
9. Why should I review KPIs: Goals may change over time, and performance and progress
toward those goals certainly will. As such, a KPI from three months ago may not be quite as
relevant. This is why it's important not to set and forget your KPIs.
10. When should I review KPIs: KPIs should be reviewed at points relevant to the final time
you've set for achieving the goal. we established that the goal should be achieved within one
year's time. Reviews, then, could be monthly if that's enough time to measure progress.
14. Which companies use KPIs: All organizations, regardless of size and sector, that have a goal
in mind and that believe creating a strategy to reach those goals is important.
Top 15 Most common questions we get on KPI's
11. How do I report on KPIs: A KPI report is a presentation that summarizes your current
performance compared to your objectives. It can be presented in a variety of ways, from
spreadsheets and slide decks to formal written reports and, as we prefer, dashboards.
Traditionally, KPI reports are developed on a quarterly basis. But, depending on how in-depth
these reports are, you may want to create a KPI report each time you conduct a KPI review.
12. How many KPI should I truck: In our experience, the fewer the better. It can be easy to load
up on too many KPIs, or to measure KPIs that aren't quite right for the particular stage of your
company. Research suggests that teams of 3-5 people are most efficient; I personally think this
range is also a good maximum # of KPIs.
13. Why are KPIs Important: The pursuit of goals depends on the focused, consistent delivery of
results. KPIs are important because they serve as the guideposts to get where one want to be.
15. What is KPI dashboard: A KPI dashboard creates a real-time visualization (on mobile, desktop
or to a wall-mounted TV in your office) of the KPIs you've selected. The best KPI dashboards are
customizable, allowing you to, among other things, change colors, organize your KPIs, and see
your progress in a single glance.