KPI stands for “Key Performance Indicator” that is used to measure performance of a people, processes, business units and the company as a whole. A quick search in google will lead to scores of definitions that vary in a subtle manner. As the saying goes, “Anything is measured; is monitored; acted upon and eventually improves”, KPI’s play critical role in any organizations reporting needs and bears the following characteristics.
- KPI’s are broadly classified into two categories namely Strategic and Operational. Strategic KPI’s typically look at long term goals whereas operational KPI’s focus on short term basis. (e.g. Capital Expenditure vs Quarterly Sales)
- Some KPI’s are unique to an organization, but majority of KPI’s are common across an industry or domain or business function.
- All KPI’s are given not equal importance. Majority of instances some KPI’s will have prominence in reporting over others, which is typically influenced by strategy.
- The set of KPI’s monitored by management evolve over a period of time as the company grows. Keeping data ready for relevant KPI’s that align strategy is an important and ongoing task for BI teams.
- Benchmarking is a critical part of defining and reporting KPI’s
- Defining a KPI is only the first step. In order to monitor, clear procedure/process with details about data points to be collected and calculation logic should be defined beforehand.
- Measures are not KPI’s. A single measure can act as a KPI, but at times collection of measures are required to derive a KPI