In brief: A KPI, or key performance indicator, is a metric showing whether we are approaching an important goal. Its relationship to a decision matters, not the number alone.
How I use KPIs in practice
I begin with the company goal and what the team must know in time. Sales may need the value of qualified opportunities, a service may need customer retention, and marketing may need the cost of an actually acquired customer. Every KPI has an owner, source, review frequency, and threshold that triggers action. Alongside an outcome indicator I need several early signals that can be influenced before the quarter ends.
What to watch out for
Visits, contact counts, or email opens are not automatically KPIs. They may grow while business stands still. Dozens of key indicators are also a contradiction: if everything is key, nothing is.
Questions for decisions
- Which goal does the indicator represent?
- Who decides from it, and when?
- Can we influence its cause?
- Does it motivate an undesirable shortcut?