Glossary · KPI (key performance indicator)
What is a KPI (key performance indicator)?
Definition: A KPI is a measurable indicator that shows whether a process, a department or a company is moving towards a specific goal, by comparing it with a target.
The acronym stands for key performance indicator. A KPI is defined by a formula, a data source, a measurement frequency, a target and an owner. For example: the percentage of invoices posted without manual intervention, calculated weekly from the ERP, with a set target and a named person responsible for explaining any deviation.
In a business, KPIs turn broad objectives into concrete signals for decision-making. They are used to track the health of a process, such as average delivery time or error rate, and to measure the effect of an improvement against the starting point. Grouped in a dashboard, they give management a quick, comparable view of performance.
Not every metric is a KPI: only the few that genuinely show whether an objective is being met. It helps to distinguish leading indicators, which anticipate a result, such as quotes sent, from lagging ones, which confirm it, such as revenue. A KPI that nobody reviews, or that never leads to a decision, takes up space in the report without adding anything.
Example: a customer service team tracks the percentage of requests resolved at first contact and the average response time each week, with a target set for each.