Dealing With the KPI Terminology ProblemNovember 4, 2014 by Stacey Barr
The words frequently used in the performance management field include ‘performance measure’, ‘metric’, ‘performance indicator’, ‘key performance indicator (KPI)’, ‘key result indicator (KRI)’, ‘lead indicator’, ‘lag indicator’, ‘initiative’, ‘strategy’, ‘goal’, ‘objective’, ‘target’, ‘priority’, ‘critical success factor (CSF)’, ‘key result area (KRA)’, ‘strategic theme’, ‘vision’, ‘mission’ – and no doubt many more.
The problem isn’t the sheer volume of words we use. The problem is that we use them differently, with varying and overlapping meanings, and we fail to explain our meanings to each other. For example, here are some variations in definition:
David Parmenter, author of Key Performance Indicators: Developing, Implementing and Using Winning KPIs, defines some of these terms like this:
- A key result indicator (KRI) tells us ‘how you have done in a perspective’
- A performance indicator (PI) tells us ‘what to do’
- A key performance indicator (KPI) is a performance measure that tells us ‘what to do to increase performance dramatically’, as opposed to other types of performance measures
By contrast, the KPI Library (www.kpilibrary.com) uses the term ‘KPI’ to refer to any kind of measure at all that a business or organisation might use to monitor its performance. They don’t make the distinctions that Parmenter does.
And others define these terms differently, perhaps not in a book but certainly implied by the way they use the terms. I’ve often seen people using the term ‘KPI’ to mean a qualitative goal, rather than a quantitative measure. They will say things like ‘we must measure our KPIs!’
And remember, ‘KPI’ is just one of the many performance management terms that does not have a standardised, universally accepted definition. I have no idea how this problem of varying terminology is going to be resolved, and that’s not the intent of this article. The intent of this article is to give you a contextual framework to make sense of where ‘KPIs’ – or performance measures, or whatever you call those quantitative pieces of evidence of our performance results – should fit.
So let me tell you my definition of these terms, and then you can map your own terms to my meanings and thus avoid distraction and confusion when you try to make sense of your own strategy.
Take, as our starting point, the following plan that describes part of the strategic direction for Chokolaide, a Swiss not-for-profit organisation that supports people with a lifestyle-diminishing addiction to chocolate (see note 1 below). For now, I’ve labelled each component of the plan as Object A, Object, B, etc.:
You probably have your own names for the ‘Objects’ used in this fairly typical plan layout. Here are the words I use for these objects, in this book and in my work:
Object A – vision statement
Object B – mission statement
Object C – organisational values
Object D – performance result
Object E – performance measure
Object F – target
Object G – strategic theme
Object H – improvement initiative
Feel free to substitute your own words, but make sure you use them consistently, and always be prepared to explain the meaning of the words you choose.
(1) It is probably obvious to you that I made this up in its entirety. What is probably not as obvious to you is that I am a chocoholic, but with no intention to reach out for help.
What measures are in your reports or dashboards, dominating discussions, but not actually helping improve performance? Start the conversation about which important result it is supposed to be evidence of, and what other measure might do a better job.by
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