Key performance indicators (KPIs), also known as key success indicators (KSIs), are the suite of highest-level measures linked to an organization’s strategic objectives. They help define and track the direction that the business is going and help it meets its goals. It is critical that KPIs:
Are clearly defined. You don’t want any confusion or ambiguity about a core metric that the organization as a whole is trying to drive. You need a clear metric definition, a clear target value, and a clear or standard timeline.
Are measurable. KPIs have to be quantifiable. You must be able to measure progress numerically over time. In other words, there should be a needle that can be moved and not a binary metric.
Have targets. “Increase revenue” is a poorly defined KPI because it has no numerical target. KPIs should be realistically achievable within organizational capacities.
Are visible. KPIs need to be visible to those responsible for driving them. Broader stakeholders need feedback and a clear sense of whether their efforts are paying off or whether they need to adjust their approach.
Reflect what the organization is trying to achieve. It is easy to fall into the trap of tracking what can be easily measured, such as response time to answer calls in a customer center, when the true objective might be to increase customer satisfaction.
Like goals, KPIs should be SMART. Specific, measurable, achievable, results-oriented, and time-bound.
Source: Anderson, Carl. Creating a data-driven organization: Practical advice from the trenches. O'Reilly Media. 2015.