Key Performance Indicators (KPI)s are the measurements that help you to see if your organization will meet their strategic goals or objectives. When you strategy or objective is worded so that you can develop metrics to determine if you are on track or not, that is when it is possible to develop KPIs. KPIs can be at any level of an organization, from the Board level, to the basic project. They help to identify that critical elements are occurring in the organization. Some may be focused on marketing, while others are focused on human resources. Some will be in sales, others in the help desk. They are customized to meet the goal or objective they are designed to monitor.
If you don’t measure to see that it was done to the level you were planning, how do you know if it is staying on track to your goal? All of KPI development start with understanding the organizations strategic goals. This should be an iterative process that involves feedback from multiple areas and layers of the organization. If your organization doesn’t know where they are planning to go, how they plan to get there, and how quickly they plan to get there; developing KPIs is not the next step.
KPIs are not business metrics, but they are similar. The key term in KPI is Key. An organization should collect many different business metrics. KPIs should only be put in place to focus on the metrics that directly measure progress on the critical goals. For Project Management, this would be those metrics for those tasks that are on the critical path.