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Key Performance Indicator

​By Mansour Baker, PHRi, SHRM-CP
15 February 2018

Introduction
Once an organization has analyzed its vision & mission, identified all its stakeholders, and defined its goals & objectives, it needs a way to measure progress toward those goals & objectives. Key Performance Indicators are those measurements.
 
Key Performance Indicators, also known as KPIs or Key Success Indicators (KSIs), help an organization define and measure progress toward organizational goals & objectives.
 
Key Performance Indicators are quantifiable measurements, agreed to beforehand, that reflect the critical success factors of an organization. They will differ depending on the organization.
 
In any Organization there may be dozens of KPIs to track performance. Which ones are significant for any firm at any time depends on what the business is planning to achieve and what current situation states is.
 
What is a goal?
Goals are long-term aims that you want to accomplish or statements you make about the future for your business.
 
What is an objective?
Objectives are more specific and easier to measure than goals. They are written without emotion, and they are typically specific, measurable, achievable and quantifiable. They also are realistic and have an associated timeline.
 
What is SMART?
SMART (specific - measurable - achievable - realistic - time related) is an acronym used in setting objectives.
 
What is a Key Performance Indicator (KPI)?
KPI is a way of measuring (performance) how well we as individuals or how well entire companies or business units are performing. A KPI should help us understand how well a company, business unit or individual is performing compared to their goals and objectives.

Goal versus Objective

• Goals are broad; Objectives are narrow
• Goals are general; Objectives are specific
• Goals are long term; Objectives are short term
• Goals cannot be measured; Objectives are measurable

Objectives map onto goals and once met, objectives contribute to the achievement of goals.

What are the reasons for objectives?

• Objectives helps the organization stay focus
• Objectives involves people on the same page
• Objectives defines what done looks like

Objective versus KPI
For example, your objective might be “preferred leader in market segment A by 4th quarter of 2019." The KPI might be "number of accounts converted to key accounts per quarter in  segment A". 

How to define, measure and report a KPI?

• Ask yourself how are you going to measure (KPI) your activities towards objective achievement and keep it simple.
• Define the unit of measurement ($, %, #, etc.). What unit of measurement will be used to measure a KPI.
• Where the data source of the measurement will come from (internal/external documents, budget, marketing campaigns, databases, reports, programs, transactions, project schedule, etc.)?
• How frequent will you report (monthly/quarterly/bi-annually/annually) on the selected KPI.

​Exhibit 1: Key Performance Indicator Example

Health Care Key Performance Indicator Example
A dermatology clinic at a hospital decided that all of their dermatologists doctors will offer quality health care (goal) to all of its patients. The below example defines what is the aim (objective) and the key performance indicator components.

​Exhibit 2: Health Care KPI Example

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Related Articles

1. HR Strategic Framework
​2. Employee Performance Meetings

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