Key performance indicator (KPI)

What is a key performance indicator (KPI)?

A key performance indicator (KPI) is a measure chosen to track progress toward a goal that matters, reviewed on a set schedule. The word key carries the meaning. A company can track hundreds of metrics, and a KPI is one of the few that leaders agree to watch because it shows whether a goal is on track. Each KPI needs an owner and a target with a date.

Why it matters to a revenue leader

Sales teams can drown in dashboards. A CRO who names a handful of KPIs, and ties each one to a goal in the plan, tells managers what to inspect and what to ignore. Pairing lagging measures such as bookings with leading ones such as new qualified pipeline gives warning before a quarter is lost. In a PE-backed company, the KPIs in the monthly report become the commercial story the sponsor reads, so pick ones you can explain and defend. Robert Kaplan and David Norton's balanced scorecard, first published in HBR in 1992, rests on the idea that what a company chooses to measure shapes what its managers do.

A testing and inspection platform plans to grow recurring revenue 12% this year. The CRO picks agreement renewal rate and new agreements signed per seller each month as the two KPIs for that goal. By midyear, renewals sit at 91% against a 94% target, so managers shift attention to agreements coming up for renewal in the next 90 days.