What is a KPI (key performance indicator)?
A core metric for measuring progress toward a goal, such as monthly sales or on-time delivery rate.
In detail
KPIs are the few most critical numbers drawn from a company's goals, used to answer “how are we doing?”. Good KPIs are quantifiable, have a clear calculation method and a clear owner, and can be checked regularly against up-to-date data.
For example
A warehouse's KPIs might be “same-day shipping rate” and “inventory accuracy”; a sales team's might be “monthly cash collected” and “new customers”.
How companies use it
Three to five per department is enough. Define clearly how each is calculated and where the data comes from, and review them on a fixed schedule. When a metric worsens, look for the cause before looking for someone to blame.
Common misconceptions
Believing more metrics is better, or measuring only what is easy to quantify. Too many metrics dilute focus; tracking sales without collections can encourage risky credit sales.
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