KPIs are the small set of metrics an organisation uses to steer.
They focus attention, since nobody can act on 40 numbers at once.
A KPI is any metric promoted to that role because it tracks a main goal.
Company KPIs track overall health, such as revenue growth, profit margin or customer numbers.
Team KPIs track each team's part, such as support response time or marketing cost per new customer.
Good KPIs link upwards, so improving a team's KPI should help a company KPI.
Each KPI has a definition, a target, an owner and a review rhythm, such as weekly.
Targets should be ambitious but reachable, or people stop paying attention to them.
A KPI dashboard shows current values against targets, with recent trends.
KPIs reviewed only once a year arrive too late to change anything.
KPIs tied to pay or bonuses attract gaming, which needs watching.
KPIs should be revisited when strategy changes, or teams keep chasing old goals.
Too many KPIs blur priorities, while too few can miss whole areas of the business.
In practice, many teams settle on 3 to 5 KPIs each.
The usual mistake is calling every metric a KPI, which leaves nothing that is actually key.