Key Performance Indicators (KPI's or Metrics)

30 October 2006

Effective key performance indicators (or metrics) are a valuable tool for triggering corrective action. Often however, metrics are worthless since they do not provide worthwhile indications of performance, particularly when this performance is below acceptable levels.

The key to this is that a KPI should normally have a trigger level set on it that is used to initiate some corrective action. If no trigger has been set then the metric is ineffective. If no one has defined the level on the metric where performance becomes bad enough to require corrective action, then there is no point in producing it.

A realistic period must also be used for each metric - in some cases this may be one hour while in others it could be one year.

So what is the definition of a KPI?

KPI - Key Performance Indicator, a measure of a factor that is critical to success
API - Additional Performance Indicator, an indication of the performance of an activity that may be used as an alternative to a KPI or provide some analysis of a KPI
SPI - Secondary Performance Indicator, an indicator of the performance of an activity that is of secondary importance to success

The key is to ensure what you wish to measure is relevant, measureable and meaningful. In fact many KPI's are none of these! So don't just record it, be sure you need it and be sure you take action on the results.