Developing Key Performance Indicators (KPIs)

Key Performance Indicator (KPI) Defined

A key performance indicator or KPI on the surface is what it sounds like, it is something that tells you how you / your business / organization / program / project are doing in critical areas of operation. While this is straightforward in a basic logical sense, developing, tracking, and using KPIs effectively is more technical and requires focused effort. Setting KPIs that don’t effectively help to track performance, aren’t managed in a way to be useful, or that won’t be used in practice are not only not helpful but can be a waste of time and counterproductive to your objectives. A good working definition of a KPI is a measure over a period of time that is specific, quantifiable, and focused on a clearly defined objective.

They can change over time

If you’re just starting out with KPIs or starting up a new project, program, or organization you may be trying to think 5 or 10 years down the road or dreaming about the big successes that you’re aiming for and trying to develop your targets and indicators based on that thinking. While long term goal setting and planning is important and setting targets for a few realistic milestones may be worthwhile it is best to try and avoid developing and tying your KPIs to those grand targets. The main reason is that it is too difficult to guess at what will happen in the next 3 to 5 years especially if you’re at the start of something new so you really can’t set KPIs because you don’t know the context of where you’ll be and what will change in that time. Instead focus on short to medium term goals and measurable behaviors and activities that comprise the necessary steps to move toward the larger goal. If you’re launching a new product line and want to move 5,000 units annually 5 years from now focus in on what needs to happen to get through the phase you’re in. If you’ve finished development and are launching it you might set KPIs around marketing such as number of posts on social media per week / month and couple that with number of views or interactions. KPIs such as this coupled with tracking marketing expenditures and sales will help give you an idea of how much you need to put in with time and money to turn over a certain number of sales during the launch phase. You can then adjust your KPIs if you pursue alternative marketing platforms or start seeing sales growth or referrals from unexpected avenues.

Is it Specific? is it measurable?

The entire point of KPIs is to be provide concise and quantifiable metrics to help with tracking and directing operations. There may be other things that you want to know that are not easily quantifiable such as qualitative information about customer / client experience, but KPIs is not the place for getting into the more squishy aspects of things. Unless you are prepared to setup and implement with consistency the kinds of rigorous methods necessary for capturing customer / client experience in a way that can be subjected to proper methods of analysis then you should avoid setting these kinds of KPIs. It doesn’t have to be complicated in order to be an effective tool. The point is that you are collecting information that helps you in an actionable manner. Tracking basic production and engagement metrics such as number of calls, referrals, walk-ins, sales, likes, shares, etc. as a starting point and staying consistent can help you move forward.

Make sure you have the right data

If you set a KPI you have to collect data in order to determine where you are at with performance on that metric. If you are not setup to collect the data needed, to analyze it, or are collecting insufficient or incorrect data then there is no purpose to having that particular KPI. Data for KPIs also has to be collected properly and consistently, if you have holes in your data because of collection issues then it isn’t going to do you any good.