understanding kpis and key metrics

Understanding KPIs and Key Metrics

Copyright© 2012 By Boyer Management Group. All Rights Reserved. www.boyermanagment.com 2

What are Key Performance Indicators (KPIs)?

What are the things you can count on your doctor doing every time you visit?

He’ll take your temperature, Your blood pressure, Your pulse rate, and Your height / weight.

These four items are the doctor’s Key Performance Indicators (KPIs) he utilizes to get a quick picture of your overall health.


KPIs are exactly the same thing… the four to six key measurements that tell you the status of the health of your organization at a glance.

Each KPI needs to be defined in terms of three elements: What specifically gets measured, The unit of measurement, and The period of measurement.



What specifically gets measured? Gross Revenues? Revenue versus Budget? Average Revenue per Customer?

What is the unit of measurement? Gross Dollars? Percent of?

Over what period of time shall it be measured?

Let’s take a look at a KPI example: Revenues



Each KPI needs an associated benchmark:

Think of a benchmark as an acceptable measurement of the KPI.

Could be stated as a single measurement or a range.

Example: a good benchmark for average revenue per customer might be set at 100% to 105% of the objective for this KPI.



KPIs are supported by a number of measurements called key metrics… Avg. Revenue per Customer – examples of key metrics:

Sales by product line. Sales by market. Sales by customer category.

You’d examine each one to uncover the cause of your current sales results.

Just like KPIs, each key metric will have its own period and unit of measurement, plus a benchmark.


Putting KPIs & Key Metrics to Work


Q: When are KPIs (and key metrics) the most valuable to your organization?

A: When they help you direct and measure its forward progress.

1. Choose the four to six KPIs that are most important for your organization.

2. You’ll need a timely tracking and reporting mechanism.



KPIs and key metrics are most helpful when they are put to work to help you steer your organization:

3. Track and evaluate the trends.

4. Determine how, when, and to whom you will communicate the KPIs.





5. The efforts and output of every business unit directly and/or indirectly impacts one or more KPIs through its operations.

6. Each business unit should identify the KPIs it should track, and four to six key metrics that underlie each KPI.




7. Institutionalize applicable KPIs at both an enterprise and business unit level, along with a plan to manage to and by the KPIs.

8. Create a self-directed staff that utilizes applicable KPIs and key metrics to make decisions and direct each person’s day-to-day activities.

To learn more about putting KPIs and Key Metrics to work in your

organization, please visit www.boyermanagmenet.com

understanding kpis and key metrics

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