KPI stands for Key Performance Indicator, which is a type of performance measurement used to evaluate the success of an organization or a particular activity. KPIs are quantifiable metrics used to track progress towards a specific goal or objective. They provide a focus for strategic and operational improvement, create an analytical basis for decision making, and help focus attention on what matters most. KPIs are most commonly defined in a way that is understandable, meaningful, and measurable. They are rarely defined in such a way that their fulfillment would be hampered by factors seen as non-controllable by the organizations or individuals responsible. KPIs are an important tool businesses use to evaluate achievements, analyze issues, and solve problems.
Some best practices for developing the right KPIs include setting targets (the desired level of performance) and tracking progress against those targets, working to improve performance using leading indicators, which are precursors of future success, that will later drive desired impacts indicated with lagging measures, and ensuring that KPIs are objective, measurable, and relevant to the organizations goals.
Every business unit has unique KPIs that help them track progress, and many organizations use KPI dashboards to help them visualize, review, and analyze their performance metrics. Its important to measure only the KPIs that will help reach business goals and to ensure that the strategic focus is one of the most important aspects of the KPI definition.
