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top   »  business   »  business analysis   »  key performance indicator

What is a Key Performance Indicator?

 , November 05, 2015 updated on January 13, 2017
A key performance indicator, or KPI, is a business measurement that is designed to focus on strategic goals.
The idea behind KPIs, is that people tend to focus on what you can measure. By carefully designing what you measure you improve your chances of meeting a strategic goal. For example, if a bank has a strategy to better manage risk, a well designed risk measurement can be considered a key performance indicator.
A well designed KPI is typically an easy to understand non-financial indicator that is used to define the goals and incentives of a team or individual. The design of KPI involves an analysis of how it will likely impact the performance of an organization including any downsides the measurement may produce. For example, if you focus on a quality related KPI, costs may go up or production may slow down.
Overview: Key Performance Indicator
FunctionManagement
Performance Management
Goal Setting
DefinitionA quantitative indicator that is designed to measure a goal in a way that motivates employees and provides visibility to management.
ValueSetting performance goals and measuring results.
Related TechniquesManagement Accounting

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