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What is a KPI

Full name: Key Performance Indicator

Also known as: key performance indicator

Definition

A KPI (key performance indicator) is one of the few numbers a business tracks against a target and a date to see whether it is on course.

Why it matters

"What you measure is what you get," Robert Kaplan and David Norton wrote in 1992: the numbers a business watches decide what people work on.

Common mistakes

Tracking so many numbers that none of them gets a decision.

Related terms

Worked exampleIllustration

The first quarter KPI card of a fictional hair salon

KPI 1: bridal bookings signed

  • Target: 12 a month, about 3 a week
  • Period: January to March
  • Owner: the owner

KPI 2: regulars who book again within 8 weeks

  • Target: 70%
  • Now: about 55%
  • Owner: the senior stylist

KPI 3: cash at month end

  • Target: at least two months of fixed costs
  • Owner: the owner

Nice to know, not KPIs

  • Instagram followers
  • Website visits

How the quarter went

  1. January Bridal bookings signed in weeks 1 to 4: 2, 2, 3 and 1. Below the target of 12.2 + 2 + 3 + 1 = 8

  2. February Weeks 5 to 8: 2, 3, 3 and 2. Still below.2 + 3 + 3 + 2 = 10

  3. March Weeks 9 to 12: 4, 3, 3 and 4. Above the target.4 + 3 + 3 + 4 = 14

  4. The quarter 32 bookings against a target of 36, about 2.7 a week against 3.3 × 12 = 36

  5. The other two Regular clients who book again within 8 weeks: target 70%, now about 55%. Cash at month end: at least two months of fixed costs.

  6. Nice to know Instagram followers and website visits. Useful to watch, and not KPIs, because no decision hangs on them.

Three numbers, each with a target, a month and a name next to it. Everything else is nice to know.

Illustration

Twelve weeks against the target

The quarter: 32 against 36, about 2.7 a week against 3. January and February fell short of 12, March beat it.223123324334⁨target 3⁩⁨January⁩⁨8 of 12⁩⁨February⁩⁨10 of 12⁩⁨March⁩⁨14 of 12⁩
Met the targetShort of the target

The quarter: 32 against 36, about 2.7 a week against 3. January and February fell short of 12, March beat it.

Bridal bookings signed each week, January to March, against the target of about 3 a week. Neon weeks met it, amber weeks fell short.

KPI or nice to know?

  • Instagram followers

  • Bridal bookings signed each month

  • Website visits

  • Likes on the Tuesday post

  • Regulars who book again within 8 weeks

  • WhatsApp reminders sent

  • Posts published this month

  • Cash at month end

  • Google profile views

  • Story views

Tap KPI or Nice to know under each number.

A KPI is a number, a target, a period and a name. Most dashboards are full of the other column.

Ten numbers the salon could watch. Only the ones with a target, a date and an owner, and a decision hanging on them, are KPIs.

Definition

A KPI is a number the business has chosen to steer by. It has four parts: the number itself, a target, a period and a person who owns it. Without the target and the period it is only a metric. The word "key" matters: a business has hundreds of numbers, and only a few tell it whether it is on course. David Parmenter, who wrote a book on KPIs, draws a finer line. Many numbers called KPIs, such as net profit, add up the work of many people over a period. They tell you how you did, not what to change this week.

Why it matters

A short card of KPIs keeps attention on the few things the strategy needs, shows early when a month goes off course, and gives each number a person who acts on it. A long dashboard does the opposite. Every number gets a glance, and none gets a decision.

Directly related: Business Strategy, OKR, Leading Indicator.

Improvement tips

  • Write every KPI with its four parts: the number, the target, the period and the owner.
  • Keep a separate "nice to know" list for numbers you like to watch but will not act on.
  • Pair a number that moves early, such as trial requests, with one that confirms, such as bookings signed.
  • Look at the card at the same time every week, and write one action next to any number that is off course.

Common mistakes

  • Calling vanity metrics, such as followers or site visits, KPIs because they are easy to count.
  • A KPI with no owner, so everyone sees it slip and nobody acts.
  • A target nobody believes is reachable, which the team stops reading after a month.
KPI vs OKR

Related terms

StrategyBeginner

Business Strategy

Business strategy is the set of choices about which customers to serve, how to win them and what not to do, so money and time go where they count.

StrategyBeginner

OKR

OKR (objectives and key results) is a way to set goals: one clear objective per quarter and two to four numbers that prove you reached it.

StrategyBeginner

Leading Indicator

A leading indicator is a number that moves before your results do, such as trial requests this week, so you can act before sales drop.

StrategyBeginner

Lagging Indicator

A lagging indicator is a number that shows a result after it happened, such as last month's revenue, and confirms whether a plan worked.

MarketingBeginner

Vanity metrics

Vanity metrics are numbers that look impressive, like followers, views or total sign ups, but do not tell you what to do next or whether sales are growing.

ProductIntermediate

North Star Metric

A North Star Metric is the one number that best counts the value customers get from your product, chosen so that growing it grows the business too.

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Quick check

What turns a number into a KPI?

Choose an answer

Frequently asked questions

What is a KPI?
A KPI, a key performance indicator, is one of the few numbers a business watches against a target and a date. It has four parts: the number, the target, the period and the person who owns it.
What is the difference between a metric and a KPI?
A metric is any number you can count. A KPI is one of the few that has a target, a period and an owner, chosen because it shows whether the business is on course. Instagram followers are a metric. Bridal bookings against a target of 12 a month is a KPI for a salon that chose to serve brides.
Which KPIs should a manager see?
Few, and each with an owner. The fictional salon on this page keeps three: bookings for sales, clients who book again for loyalty, and cash at month end. Everything else goes on a "nice to know" list that nobody has to act on.
What is the difference between a KPI and a key result indicator?
David Parmenter separates two families. Result indicators, such as net profit, sum up the work of many teams over a period, so they tell you how you did but not what to fix. Performance indicators are tied to one team and tell management what to act on. In his view, many numbers called KPIs are really key result indicators.
What is the difference between a KPI and an OKR?
A KPI is a number you keep watching for as long as it matters. An OKR is a goal for one quarter: an objective in words and a few key results that show whether you reached it. A KPI that goes off course is often what the next quarter's OKR is about.
Should a KPI be a leading or a lagging indicator?
Keep one of each. Bookings signed this month is a lagging number, it confirms what already happened. Trial requests this week move earlier and give time to act. A card with only lagging numbers reports problems after the chance to fix them.
Why not just watch the money?
Because money is the last number to move. Kaplan and Norton argued in 1992 that financial measures alone can give misleading signals, and set them beside other measures in what they called the balanced scorecard. In a small business, bookings or returning clients usually turn before revenue does.
How many KPIs should a small business track?
As many as someone actually acts on. For most small businesses that is a handful. The rest can stay on a "nice to know" list.
How do I set a KPI target?
Start from what the strategy needs and what you do today. A target nobody believes is reachable stops being read, and a target you already hit every week tells you nothing new.
How do I start using KPIs without stopping daily work?
Pick three numbers and write each with its target, its month and its owner on one card. Look at the card at the same time each week for ten minutes, and ask one question per number: on course or not, and if not, what do we do this week.
Are KPIs complicated or risky?
Not complicated. The risk is tracking too many and acting on none: the dashboard fills up, every number gets a glance, and none gets a decision.
Do I need special software or an accountant to track KPIs?
No. A spreadsheet or a sheet of paper is enough for a handful of numbers. Your accountant already sees the financial ones, such as cash at month end, and can help you read them.

Sources: Robert S. Kaplan and David P. Norton, "The Balanced Scorecard: Measures That Drive Performance", Harvard Business Review, January-February 1992, vol. 70, no. 1, pp. 71-79, David Parmenter, Key Performance Indicators: Developing, Implementing, and Using Winning KPIs, 4th edition, Wiley, 2019

Last reviewed: 2026-09-25

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