What are the characteristics of a good KPI? (2024)

"KPIs represent a set of measures focusing on those aspects of organizational performance that are the most critical for the current and future success of the organization."

David Parmenter

A Key Performance Indicator (KPI) is a measure used by an organization to monitor and quantify the success of the strategic and operational goals it has previously set. A KPI allows aorganization to useindicatorsto analyze the success of long term strategic goals and objectives as well as the performance of projects and other operational functions like marketing, sales, production and customer care.

For KPIs to be effective, they should have these characteristics:

1. Don’t start by asking for a list of everyone’s KPIs
2. Start from the top
3. Use leading indicators to drive results
4. Avoid vanity KPIs
5. Look beyond the numbers
6. Let the data decide
7. Always remember that your KPIs must facilitate decisions
8. Reflectstrategicvaluedrivers
9. Are related to specific goals
10. Are non financial measures
11. Are measured frequently
12. Aredefinedby“Executives”
13. Are acted on by the CEO and senior management team
14. Arebasedoncorporatestandards
15. Predictive in nature, indicating what drives business value
16. Don’t measure individual performance, instead they look at processes and activities
17. Mustbeeasytocomprehend
18. Encourage appropriate and positive action
19. Are timely and accurate feedback
20. Clearly indicate what action is required by staff
21. Visible across the entire organization
22. Cascadethroughoutanorganization
23. Can be influenced or controlled by the user alone or in cooperation with others
24. Are measures that tie responsibility down to a team
25. Arebasedonvaliddata
26. Have explicitly defined formula and source of data
27. Have a significant impact
28. Arealwaysrelevant
29. Drives continuous improvement
30. Provide fast feedback and are part of a closed management loop
31. Providecontext (threshoulds, targets and benchmarks)
32. Have a achievable target
33. Empowerusers
34. Dynamic management
35. Maintaina healthy balance