Key Performance Indicators, or KPIs, basically mean “very important measurements.” They are proof that your strategies are on the right path, and they are ways to measure success (rather than results).  KPIs provide knowledge on your current business performance and progress and provide you with the information needed to take relevant actions.

Defining/Measuring KPIs

Keep in mind that all measurements are not equally important.  When creating/assessing meaningful KPIs, do not rush into the process.  Tailor each indicator to what is relevant to your business.  As you create one, understand what message it conveys.  Does it help answer questions in a bigger picture?

Key Components of Measurable KPIs:
1. A stated strategy or goal

Ask yourself the following questions: What is it that I am trying to achieve? How do I get there?  Whether this is for your organization’s 3-year strategy or a one-time project you’re undertaking, having a stated goal gives you the framework on which to measure success.

2. Measurement unit

Define what metric you will use to determine if you’ve achieved your goal. If your goal is to see growth, then look at trends over time (% growth).  A sales target at end of year would be measured in dollars ($).

3. Measurement period (timeline)

Choose a timeline that is appropriate for what you are measuring.  Are you taking a short-term (3 months), or a longer-term (3 years)? Be sure to have a realistic timeline, as being too short-sighted can lead to risk of failure, while looking too  broadly may turn into a waste of resources.

4. Message/results conveyed

Pay attention to what your KPIs are telling you. Utilize a trial and error approach with hypothetical scenarios before you start working to achieve your goals.  Make sure that the goals are simple and easy to understand.

Tips for Creating Measurable KPIs
  • Ensure KPIs are SMART (specific, measurable, attainable, realistic, and time-bound)
  • Pushing measures too far can have an unintended negative impact on your ultimate strategic goals.
  • Limit your quantity of KPIs.

Look at your goals with a big picture perspective to set goals that are most important to your organization’s success.

What have you learned about defining KPIs?  How do you track your performance?