Key Performance Indicator (KPI)

KPIs turn goals into numbers that can be tracked. Instead of a vague aim such as "keep customers happy", a business might track a specific KPI such as the percentage of customers who renew each year.

Good KPIs are clearly linked to strategy, measurable, understood by the people responsible for them and tracked regularly. They often come with targets, so performance can be judged as on track or off track.

KPIs vary by business and role. A shop might track sales per square metre and average transaction value. A subscription business might track monthly recurring revenue and churn rate. A factory might track output per hour and defect rates. A finance team might track how quickly customers pay.

For example, if a call centre sets a KPI of answering 90% of calls within 30 seconds and actually answers 82%, managers know there is a problem to investigate.

Choosing the right KPIs matters. Measuring too many dilutes focus, and measuring the wrong things can encourage unhelpful behaviour, such as rushing calls to hit a time target at the expense of quality.