What Are KPIs and Performance Measures?

April 17, 2018 by Stacey Barr

KPIs and performance measures are misunderstood and misused, mostly because they are not consistently defined. Here is a clear and practical definition of what KPIs and performance measures are.

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When we have the right words to define what KPIs and performance measures are, it makes a tremendous difference to how easily and meaningfully we can create and use them. It’s too easy for people to assume they are actions, milestones, or criteria for employee performance appraisal. They’re not about those things at all!

Many definitions of what KPIs and performance measures are aren’t good enough.

I’ve read a lot of the popular definitions of what KPIs and performance measures are, and I’m underwhelmed. Many are too vague to nail down exactly what a measure of performance is. And there are so many different definitions that conflict with each other.

Little wonder so many people don’t really appreciate the essential characteristics and uses that define KPIs and performance measures, and that discern them from any other business numbers we might use.

What are KPIs, KRIs, metrics, performance indicators, and performance measures?

And there are likely additional terms you’ve heard to describe these objects we use to track performance.

There is no universal definition of any of these terms. For example, the term KPI is an acronym for ‘key performance indicator’. It was reserved for the current and strategically most important measures for an organisation’s strategic direction. Now, the acronym KPI is used without such discernment, and so the ‘key’ has become meaningless.

And the term ‘metric’ means the same as a KPI to some people, but to others it means a collection of related measures that together become a metric. (It also means a system of measurement based on metres and grams, as opposed to the imperial system which is based on feet and pounds!)

There likely never will be a universally accepted KPI and performance measurement terminology. It’s more helpful if we forget the terminology problem. Because they’re all basically the same thing!

A clear performance measure definition that works every time.

Not yet have I found a more useful or clear definition of what a KPI or performance measure (my preferred term) really is than the one I created 20 years ago:

“A performance measure is a quantification that provides objective evidence of the degree to which a performance result is occurring over time.”

And I encourage you to use this definition too, to give people more clarity and consistency about what performance measures really are.

The recipe to produce real performance measures.

You can see how this works in the 4-step recipe I recommend for writing performance measures:

  1. The statistic (average, number, percentage, etc…)
  2. The performance attribute data item (tonnes of waste, customer satisfaction, total expenditure)
  3. The scope data item (waste that isn’t recyclable, customers active in the last month)
  4. The temporal data time (week, month, quarter)

And so a good measure looks like this:

New Referred Customers: Total number of new customers referred by an existing customer, by month.

Forget about how KPIs, metrics, indicators and measures are different to one another. They are all basically performance measures, as I defined above. The most important thing is to help everyone arrive at the same understanding of a what a performance measure really is.

Forget about KPI, metric, indicator, measure terminology. It’s more important people have the same understanding of what a real one is.
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