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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 makes progress toward an important business, team, project, or process goal visible.
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The word “key” matters. Organizations can track many measurements, but only a smaller number are strategically important enough to guide attention and decisions. APQC describes KPIs as measures that typically correspond to critical success factors and business goals, supported by other indicators where useful.
How a KPI differs from a measure or metric
These terms are related, but they describe different things. A measure is the defined observation of performance; a metric is the quantifiable result, often expressed as a number, percentage, or ratio. A KPI is a measure selected because it indicates progress on an important objective. Therefore, not every metric is a KPI.
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| Term | Meaning | Example |
|---|---|---|
| Measure | A defined observation of a process or outcome. | Whether a customer support request is resolved within a stated time. |
| Metric | The numeric result used to quantify performance. | The percentage of requests resolved within that time. |
| KPI | A strategically important measure tied to a goal. | That percentage, if improving timely support is a priority objective. |
The same metric may be a KPI in one organization and a routine supporting measure in another. Its status depends on the objective and whether the result is useful for assessing or influencing progress.
How to choose a useful KPI
Start with the objective rather than with data that happens to be easy to collect. Then select a measure that indicates whether the objective is advancing. For each candidate, establish its definition and source, when it will be reviewed, and what a meaningful change should prompt the team to do.
- State the objective. Make the intended outcome specific enough that progress can be assessed.
- Choose an aligned measure. Ask whether the result directly signals progress on that objective, rather than activity that may or may not lead to it.
- Define the calculation and data. Specify what is counted, the data source, and the time period so people interpret the value consistently.
- Check influence and timeliness. Consider whether the team can affect the result and whether updates arrive soon enough to be useful.
- Set a target and timeframe where useful. A target or comparison with a benchmark or historical performance can make movement easier to interpret.
- Connect changes to decisions. Decide what action, investigation, or adjustment a result could trigger. If no one would respond to the signal, it may not belong among the key indicators.
- Review the set regularly. Keep indicators relevant as goals or conditions change, and avoid crowding the dashboard with measures that do not help people act.
Asana recommends choosing three to five KPIs for a project; that is its project guidance, not a universal limit. The appropriate number depends on how many measures are genuinely needed to understand progress without obscuring the main signal.
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A leading indicator is a predictive signal that may provide information about future performance. A lagging indicator records an outcome that has already occurred. The U.S. Office of Personnel Management (OPM) recommends using relevant indicators and distinguishes between these types; it also advises monitoring quantitative and qualitative measures.
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For example, a team might track a forward-looking process signal alongside the final result it is intended to influence. The leading measure can prompt an earlier response, while the lagging measure shows whether the desired outcome was ultimately achieved. Neither type is automatically better; which is useful depends on the objective, the reliability of the signal, and how quickly the team can respond.
KPI examples by objective
Examples are useful only when linked to a goal. A measure that is important for one organization may be peripheral for another.
| Area | Possible KPI | 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 | Maintain or improve cash generated by operations. |
| Customers | Customer satisfaction | Improve customers’ reported experience. |
| Customers | Retention or churn | Retain customers or reduce the rate at which they leave. |
| Customers | Customer acquisition cost | Manage the cost of gaining customers. |
| Projects | A measure of progress toward the project’s defined goal | Determine whether the intended project outcome is on track. |
| Processes | Cost, quality, resource use, or process performance | Improve a specified process outcome or its use of resources. |
APQC’s Process Classification Framework version 8.0 collection includes process definitions and recommended KPIs by process group. It can help identify process-specific measures, but a suggested measure still needs to fit the organization’s own objective and context.
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KPI and OKR: what is the difference?
An OKR is a goal-setting structure organized around an objective and key results. A KPI usually tracks performance over time; an OKR frames an objective and the results used to assess it. They can overlap: a KPI may help monitor progress toward an OKR, or a key result may be tracked as an indicator. Organizations use these systems differently, so the distinction is practical rather than absolute.
What APQC’s 2024 survey figures do—and do not—show
In its KPI explainer, APQC reports that 2024 survey respondents identified improving performance (48%), ensuring quality and consistency (46%), optimizing resource utilization (44%), reducing cost (44%), and boosting revenue (33%) among the reasons for using KPIs. APQC also reports that 38% considered their current measures effective or very effective.
APQC’s published summary does not provide the survey sample size or detailed methodology. These figures describe the respondents covered by that summary; they should not be treated as representative of all organizations or as evidence that KPI use caused any particular outcome.
Quick Recap
Sources
- APQC: What Is a Key Performance Indicator (KPI)?
- Asana: What is a KPI? Definition, examples, and the ultimate guide
- APQC Process Classification Framework
- U.S. Office of Personnel Management: Monitoring
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