How do you pick indicators that you can actually track?

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Selecting the best key performance indicators (KPIs) for your organization is of utmost importance. KPIs identify what is important to your organization, and provide the baseline by which you measure your aptitude and success in areas like finance, customer service, internal processes, and more.

That being said, selecting high-quality KPIs isn’t easy, and KPI tracking is even harder. To help you on your way to KPI nirvana, I’ve written up a few tips, tricks, and common misconceptions.

Projects Vs. Measures

Projects and measures are both terms used in the creation of a Balanced Scorecard. Before we identify how to select great KPIs that you can actually track, we should first look at the difference between these commonly-confused ideas:

  • A project (or initiative) is defined as a program developed to achieve objectives.
  • This would be something like, “Did we get our new marketing software up and running this month?” That’s a great project, but it isn’t a measure.
  • A measure (or KPI) is an objective you track in order to see if your projects are working.
  • A measure may be, “Number of online leads captured per month.”

Projects are critical for driving or improving measures, but they aren’t measures themselves. You certainly shouldn’t discount them or throw them out, but you should utilizing them in appropriate ways.


A good way to determine whether or not something is a project is to see if you can answer “yes” or “no” to it, or if you can determine that they are a certain percent complete. If you can, you’re looking at a project, not a measure. “Yes” or “no” questions are not SMART KPIs, which brings me to my next point...

How to Create a SMART KPI

SMART is an acronym for Specific, Measureable, Attainable, Realistic, and Timely. (It was mentioned for the first time in a 1981 paper titled “There’s a S.M.A.R.T way to write management goals and objectives,” published by a consultant named George D. Duran.)  This acronym is extremely important to keep in mind when determining if your KPI is going to be successful. To create a SMART KPI, you should be able to ask and answer the following SMART questions:

  • Specific: Is this KPI too broad, or is it clearly defined and identified?
  • Measurable: Can I easily quantify this measure?
  • Attainable: Is it realistic for us to obtain this measure? Can I take the appropriate measures to implement this KPI and see changes?
  • Realistic: Is our measure practical and pragmatic?
  • Timely: Are we able to look at data for this measure on a monthly or quarterly basis as opposed to annually?

Examples Of Bad Measures & KPIs

To truly understand the good measures, let’s look at some examples of bad measures and why they aren’t S.M.A.R.T.

  1. Raw materials cost (Financial): This can be out of your control, making it unattainable.
  2. Share of wallet (Customer): Measuring your share of the customer’s business is not always specific or measurable. There are cases where this can work, but you need to have great insight into all of your customer purchases.
  3. Project implementation (Internal): You can’t repeat this, so you really cannot measure it. It is a good project, but not a measure.
  4. Employee evaluations (Learning & Growth): These usually aren’t realistic because employees can use them unfairly to their advantage. They also aren’t timely––they’re given out once a year, not quarterly.

Examples Of Good Measures & KPIs

Now that you understand what bad measures look like, let’s look at a view good measures. Each of these are specific, measurable, attainable, realistic, and timely.

  • Net new revenue (Financial): Looking at your new gross sales minus costs is extremely important for understanding financial health.
  • Specific:  Make sure you have a clear definition of new sales
  • Measurable:  This is easily calculated
  • Attainable:  You can get this easily from your accounting system
  • Realistic:  This is practical and pragmatic to track
  • Timely:  You can get this each month
  • Net promoter score (Customer): Your NPS score gauges the health of a company’s customer relationships.
  • Number of accurate deliveries within a service window (Internal): This KPI will help you determine if your internal processes are efficient and up-to-par.
  • Employee satisfaction (Learning & Growth): Unlike employee evaluations (which we have determined is not a good measure), employee satisfaction is a realistic and important measure.

Of course, every organization is different. These may or may not be attainable for your organization. Remember that every successful KPI must have a target associated with it. Don’t be afraid to set aggressive targets. For example, if you want to measure the number of accurate deliveries within a service window, you’ll need to set your target for accurate deliveries, and then use your measure to determine whether or not you’ve met your goal.

Takeaway

Meeting strategic goals is nearly impossible without well-thought-out projects, targets, and measures. The best KPIs help you understand what you can influence and which actions you can take through their measurement. If you’re ready to begin selecting the best KPIs for your organization, check out 18 Key Performance Indicators Examples Defined For Managers.