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What Are KPIs and Performance Measures?

April 17, 2018 by Stacey Barr

Whether it’s vague or new to you, or whether you totally get it, having the right words to define what KPIs and performance measures are is so useful. It’s too easy for people to assume they are actions or things for employee performance appraisal.

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I’ve read a lot of the popular definitions of what KPIs and performance measures are, and I’m underwhelmed. Almost all fail to nail down exactly what a measure of performance is, and the fact that there are so many different definitions is a worry.

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 many more names people use to describe the objects they use to track performance.

There is no universal definition of any of these terms. For example, the term KPI used to mean key performance indicator, and was reserved for the current and strategically most important measures. Now it’s used without such discernment, and so the ‘key’ has become redundant.

There likely never will be a universally accepted terminology. It’s more helpful to 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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