Overview of KPI's

Organisations collect data and key performance indicators (KPIs) to gain insights and inform decision-making.

• KPIs: provide the performance information that enables organisations or their stakeholders to understand whether the organisation is on track or not.
• Data: is the raw material, which companies use to create KPIs or to perform any type of analysis. Data are values (or measurements) that can be quantitative or qualitative in nature. Data can come in many formats such as numbers, text descriptions or video captions and can be collected in different ways (e.g. automatically via sensors or manually via surveys).

Data and KPIs are used to provide insights into the performance levels of an organisation. Data on its own is worth little. It needs the strategic context in order to be relevant and meaningful. Most companies are trying to reduce the complex nature of their business by creating a small number of key indicators in order to make performance more understandable and digestible. This is the same approach we use in our daily lives. For example, when you go to your doctor he might measure blood pressure, cholesterol levels, heart rate and your body mass index as key indicators of your health. With KPIs we are trying to do the same in our organisations.

In practice, the term KPI is very much overused. For many it describes any form of measurement data and performance metrics used to measure business performance. Instead of clearly identifying the information needs and then carefully designing the most appropriate indicators to assess performance, companies end up measuring and reporting everything that is easy to count with little or no real business insights.

A good starting point for developing more relevant sets of data and KPIs are your strategic goals and the management questions you want to have an answer to. If you can articulate the questions you need to have an answer to then they will point you to the right KPIs and data that you will need to collect to answer your questions.

The ICAEW Library & Information Service provides full text access to leading business, finance and management journals and key business eBooks.

Further reading on KPIs is available through the resources below.