A key performance indicator, or KPI, is a defined measure used to track progress toward an important operational or business objective. A useful KPI has a clear formula, data source, owner, target and decision purpose.
What should a KPI definition contain?
- Business objective and scope
- Numerator, denominator and unit
- Population, exclusions and time period
- Data source and calculation frequency
- Target, threshold and direction
- Owner and required response
How is a percentage KPI calculated?
If a team completed 940 of 1,000 eligible cases within the service target, on-time performance is 940 ÷ 1,000 × 100 = 94%.
Illustrative KPI calculation
| Calculation step | Value | Treatment |
|---|---|---|
| Eligible cases | 1,000 | Defined population |
| Completed within target | 940 | Numerator |
| On-time result | 94% | 940 ÷ 1,000 × 100 |
| Contract target | 95% | Required level |
| Gap | 1 percentage point | 95% − 94% |
The period and exclusions must be applied consistently. Removing difficult cases after the fact changes the metric.
KPI vs. service-level agreement
A KPI measures performance. An SLA is a contractual commitment that may use one or more KPIs and specify remedies. Not every useful internal KPI belongs in the contract.
What makes a KPI harmful?
A narrow measure can reward the wrong behavior, such as closing tickets quickly without solving the issue. Use a balanced set that covers speed, quality, control and outcome.
