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What Are KPI?

KPI's are generally known as "Key Performance Indicators".  There are lots of variants to KPI's and they can come on a wide variety of acronyms.  For the purposes of this discussion we will lump them all into one bucket called "KPIs".  For an indepth overview of Key Performance Indicators (KPIs), Key Results Indicators (KRIs), Results Indicators (RIs) and Performance Indicators (PIs) consider "Key Performance Indicators" by David Parmenter; somewhat of an authority on the subject.
 
What are KPI
 
KPIs are the sophisticated, modern version of "flying by the seat of your pants".  They are a set of key numbers which underlie the operating performance (or other performance) of a business.  They are real time in the true sense of the word and ideally are generally limited in number.  They have none of the inherent drawbacks of traditional accounting measures which generally report long after the event.
 
In the formulation of KPIs you need to consider the needs of your target audience and the target audience itself.  A dashboard of KPIs for operational managers will certainly consist of different measures than those required for the board.  So a broad understanding of strategic and tactical measures is necessary for management at various levels to gather their information for their relevant decision making processes.
 
KPIs are a visual tool, whose purpose is to convey information, trends or variations at a glance. This can generally be achieved through simplistic graphical measures such as line or bar graphs. Your dashboard should not be full of "fluff" or fancy great looking graphics, if the user needs to spend time interpreting your visual presentation then you have got it wrong.  
 
Caution should also be taken on the number of measures you are presenting.  You really need to identify "Key" numbers, and drill down to numbers that are at the core of other numbers, that is, independent numbers rather than dependent numbers.  If you are producing more than 20 key numbers then you may want to rethink and re-calibrate your determination of KPIs.  Lots of measures can usually result in large task lists which generally lead to ineffective management.  So keep the measures relevant and important.  Many business operate successfully within the 10 KPI range.
 
KPIs are a visual tool, whose purpose is to convey information, trends or variations at a glance. This can generally be achieved through simplistic graphical measures such as line or bar graphs. Your dashboard should not be full of "fluff" or fancy great looking graphics, if the user needs to spend time interpreting your visual presentation then you have got it wrong.  
 
Caution should also be taken on the number of meaures you are presenting.  You really need to identify "Key" numbers, and drill down to numbers that are at the core of other numbers, that is, independent numbers rather than dependent numbers.  If you are producing more than 20 key numbers then you may want to rethink and recalibrate your determination of KPIs.  Lots of measures can usually result in large task lists which generally lead to ineffective management.  So keep the measures relevant and important.  Many business operate successfully within the 10 KPI range.

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