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A key performance indicator (KPI) is a measure chosen to show whether an important goal is being achieved. A number is not a KPI just because it appears on a report: it earns that role when it is strategically relevant, clearly defined, and useful for deciding what to do next.
What does KPI stand for?
KPI stands for key performance indicator. APQC defines one as “a specific measure used to gauge a quantifiable component of an organization’s performance at the functional, process, or activity level.” In practical terms, a KPI gives a team or organization a way to track progress toward an important objective.
The word “key” matters. Organizations can collect many numbers, but only a small selection should be treated as indicators of success. A useful KPI is tied to a goal that matters and is meaningful enough to guide assessment or action.
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These terms are related, but they describe different things. APQC notes that KPIs typically correspond to critical success factors and business goals, and may be supported by other indicators.
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| Term | Meaning | How it relates |
|---|---|---|
| Measure | A defined observation of process performance. | It specifies what is observed and how. |
| Metric | A quantifiable result, often expressed as a number, percentage, or ratio. | It is the value produced by measuring something. |
| KPI | A measure selected for its strategic importance. | It is a metric or measure linked to an important objective and used to assess progress. |
For example, a company might record the number of support requests received each week. That count is a metric. If reducing unresolved requests is a major service objective, the company might choose the percentage resolved within a stated timeframe as a KPI. The appropriate choice depends on the objective; no measure is universally a KPI.
How do you choose a useful KPI?
Start with the goal, not with the data already available. Then choose a measure that indicates whether progress is happening and can inform a decision. The following checks are practical selection criteria, not a formal standard.
- State the objective. Make it specific enough that people can tell what success would mean.
- Choose a directly relevant measure. Ask whether a change in the measure would genuinely indicate progress toward the objective.
- Define the calculation. Specify what is included, what is excluded, the unit, and the calculation method so results are interpreted consistently.
- Confirm the data and timing. Identify the data source, how often it updates, and any delay between an event and its appearance in the measure.
- Set a target and timeframe where useful. A number without a comparison point may be hard to interpret; use a goal, benchmark, or historical baseline when appropriate.
- Decide what action a change could prompt. If nobody can explain what they would investigate or decide when the KPI moves, reconsider whether it belongs in the set.
- Review and refine. Check the measure regularly against the objective and update it if the goal, process, or available data changes.
For project KPIs, Asana recommends choosing three to five for a project. Treat this as that organization’s guidance, not a universal limit. The useful principle is to keep the set focused: a dashboard crowded with measures that do not affect decisions can obscure the important signal.
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A leading indicator is a predictive signal that may suggest how performance will develop. A lagging indicator records a result after it has occurred. For instance, a team could monitor a forward-looking process measure alongside the eventual business outcome it is meant to influence. The exact measures depend on the goal and the available evidence.
The U.S. Office of Personnel Management recommends using relevant indicators, monitoring both leading and lagging signals, and considering quantitative and qualitative measures. Its roadmap also emphasizes regular check-ins against goals, benchmarks, or historical data. A leading measure can help a team respond sooner, while a lagging measure shows whether the intended result was achieved; neither automatically replaces the other.
What are examples of KPIs?
Examples make sense only when connected to a particular objective. Measures commonly used in one function may be irrelevant to another team’s priorities.
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| Area | Possible KPI | Example objective it could support |
|---|---|---|
| Finance | Monthly sales growth | Increase sales over a defined period. |
| Finance | Net profit margin | Improve profitability relative to revenue. |
| Finance | Operating cash flow | Monitor cash generated by operations. |
| Customers | Customer satisfaction | Improve customers’ reported experience. |
| Customers | Retention or churn | Keep more customers or reduce departures. |
| Customers | Customer acquisition cost | Track the cost of acquiring customers. |
| Projects | A measure of progress toward the project’s defined goal | Assess whether the project is advancing its intended outcome. |
| Processes | A measure of cost, quality, resource use, or process performance | Improve a specified process result. |
For process measures, APQC’s Process Classification Framework version 8.0 collection provides process definitions and recommended KPIs by process group. The relevant process group and objective determine which suggestions apply; the framework does not make every listed measure a priority for every organization.
How are KPIs different from OKRs?
An OKR is a goal-setting structure organized around an objective and key results. A KPI usually tracks performance over time, while an OKR frames an objective and the results used to assess it. The two can overlap: a key result may use a KPI, and a KPI may help monitor an objective. Organizations use these terms and systems differently, so the labels alone do not establish how a particular team manages its goals.
What do organizations use KPIs for?
APQC reported results from a 2024 practitioner survey in its KPI explainer: respondents cited improving performance (48%), ensuring quality and consistency (46%), optimizing resource utilization (44%), reducing cost (44%), and boosting revenue (33%) as reasons for using KPIs. APQC also reported that 38% considered their current measures effective or very effective. The page does not provide the survey’s sample size or detailed methodology, so these figures describe the reported respondents and should not be treated as representative of all organizations or as evidence that KPIs caused those outcomes.
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Sources and further reading
- Asana: Key performance indicators (KPIs)
- APQC: What Is a Key Performance Indicator (KPI)?
- APQC Process Classification Framework
- U.S. Office of Personnel Management: Monitoring
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