What is a key performance indicator (KPI)?

Because KPIs must be measurable, specific, and relevant, they can be difficult to get down on paper in any amount of detail. When you are in the process of writing and developing your KPIs, consider the following steps:

The relationship between your goals and your KPIs is essential. As such, creating effective KPIs starts with a clear evaluation of how the KPI should relate to a specific objective or business outcome. KPIs need to be more than numbers and data; they should be a strategic expression of what your organization is trying to accomplish—backed by numbers and data. All of this starts with writing out a clear goal or set of goals.

Without buy-in from everyone involved, a KPI is nothing more than words. Communicate your goals and what you plan to measure with all stakeholders and let them know exactly how performance and progress is to be measured. Field any questions stakeholders may have and be open to their ideas on how to improve your KPIs. If possible, thread your goals throughout the organization to ensure complete alignment and understanding.

Set a regular cadence (such as weekly or monthly) to review and reevaluate KPIs. Remember, performance indicators should be dynamic; don’t stick with an established KPI if it no longer accurately represents what you are trying to achieve. Reviewing KPIs will not only allow you to track progress and performance but will also provide insight into how effectively you are selecting and developing your KPIs overall. If KPIs are no longer relevant, prove to be unattainable, or are simply not actionable or effective, then go back to the drawing board to revise and update them to be more in line with your objectives.

Within the SMART criteria, KPIs can cover essentially any processes or goals across any industry. That said, KPIs tend to fall into one of four different categories.

Input KPIs measure the amount, quality, type, etc. of resources used to produce outputs.

Process-focused KPIs are those that relate to the actions or tasks that go into producing a specific output. These may also include process controls, such as process training and tools or equipment.

Output KPIs measure work completed and/or products produced.

Further distinguished as either intermediate outcomes (outcomes that must occur to achieve end goals) or end outcomes (highest-level objectives), these KPIs focus on what has been accomplished and what sort of impact is being made. It’s worth noting that the market is currently shifting in what is considered the best approach to measuring outcomes.

Measuring and tracking progress brings with it a clearer understanding of where resources are most needed, and where they could be put to better use.

Effective KPIs bring employees together, ensuring that everyone is pulling in the same direction and provisioning clear insight into how individual performance affects company goals. This allows for a more fulfilling employee experience, improving employee engagement in the process.

A more-accurate view of processes helps organizations identify areas where automation and self-service options could be implemented to improve efficiency.

KPIs are essential, not only in achieving established goals, but also in creating a culture of continuous improvement. Refine objectives, increase output, improve efficiency, and ensure that everyone involved is working towards reaching and redefining company success.