Knowledge Base · Measurement
What is a KPI, and how do I choose the right ones?
A KPI is a Key Performance Indicator: a number tied directly to a strategic objective, not just any measure of activity. The book's tests keep the set small: each KPI is relevant to an important goal, measurable accurately and consistently, actionable when it moves, and trackable over time so the trend is visible.
The book treats a KPI as a navigational tool, like a compass for a team or organisation. It tells you whether you are heading in the right direction toward your most important goals. The glossary makes the same point in plainer terms: a good KPI tells you if you are winning or losing the game. Activity on its own does not qualify. A sales team counting calls is counting effort. Its conversion rate from calls to actual sales measures performance.
Before choosing a KPI, test a candidate metric against four tests:
- Relevant: it relates directly to an important goal, and measures something that matters to customers and to the business.
- Measurable: you can track it accurately and consistently, with a reliable way of getting the data.
- Actionable: if the number rises or falls, it prompts specific questions or actions and helps you make better decisions.
- Time-bound: you can track it over time, set realistic targets and deadlines, and read the trend rather than a single snapshot.
Weak metrics fail these tests. The number of emails sent is measurable, but a team could send a thousand emails and accomplish nothing of value. Customer response time and first-contact resolution rate pass: they matter to the customer, they can be tracked, and a poor result points to specific steps a team can take.
“It’s not just any number; it’s a number that indicates performance and is tied directly to a strategic objective.”
Continuous Improvement in the Workplace, Ch. 5
Related questions
- How do I know whether an improvement actually worked?
- How often should a team review its metrics?
- "What gets measured gets managed": is that actually true?
Source: Continuous Improvement in the Workplace, Ch. 5 (Measuring Success and Ensuring Sustainability); the CI glossary in the book's Appendix.