Companies use Key Performance Indicators (KPI), also known as Key Success Indicators (KSI), to measure progress towards company goals as well as any deficiencies. These metrics must be well-defined and quantifiable to be of good use. Microsoft Midsize Business Center states, "Using the wrong metrics can give you an incomplete or irrelevant snapshot of your business." This may lead to a false sense of confidence that further damages the company's progress.
Vague or unspecific KPIs leave room for error and make it difficult to measure them effectively. Admin Secret gives the example of setting a KPI of increased sales as defined by the change in sales volume from month to month. This is considered too vague, because it is unclear whether this will be measured in revenue or on a per-unit basis.
The scope of the KPI is another part of making it as specific as possible to increase its effectiveness at identifying potential problems in the company. Continuing with the previous example, the measured area of a bad KPI would be all regions. This lack of specificity makes it impossible to identify regions that are doing particularly well and regions that are failing miserably. Breaking up the KPI into different regions allows the business to model the efforts of successful regions and examine failing regions more closely to identify the factors behind their poor performance.
Bad KPIs lack specific goals with established units of measure and deadlines that help determine success or failure. A KPI goal of a monthly increase in sales volume lacks both elements, for example. This goal does not define how much of an increase the company wants nor does it define the term "increase" in any specific unit of measure such as a percentage. The word "monthly" does denote a time frame, but it is too open-ended to be considered a valuable metric without a quantitative unit of measure to precede it.
Kenrick Callwood has been involved in Internet marketing since 2007 and his work has appeared in numerous online publications. His main areas of expertise are psychology, travel and Internet marketing. He holds a bachelor's degree in psychology from California Polytechnic University.