What is a KPI? What are KPIs? Key Performance Indicators

Summary

In this video, the concept of Key Performance Indicators (KPIs) is explored. KPIs are quantifiable measures of progress towards specific business goals, linked to strategic objectives. The video highlights the importance of KPIs in managing and improving performance, citing Peter Drucker's quote, 'What gets measured, gets managed.' It explains the characteristics of effective KPIs, emphasizing their role in decision-making, tracking performance trends, and ensuring alignment with organizational priorities. The video also outlines how to create good KPIs using the SMART criteria and provides practical insights for project managers to drive and enhance project performance.

Takeaways

• 📊 Key performance indicators (KPIs) are essential quantifiable measures of progress towards intended outcomes.
• 📈 KPIs help link performance to the achievement of business portfolio, program, or project objectives.
• 📋 KPIs focus work on delivering operational or strategic requirements.
• 📝 Peter Drucker's quote 'what gets measured, gets managed' emphasizes the importance of KPIs in managing performance.
• 🎯 KPIs provide targets to work towards and can engage and energize project teams.
• 🔄 KPIs can be statements of ultimate goals or proxy indicators measuring closely related achievements.
• ⏳ KPIs include leading indicators (progress) and lagging indicators (success post-completion).
• ✔️ Good KPIs have six main characteristics: objective evidence, measure the right things, link to strategic imperatives, track performance over time, track relevant metrics, and be SMART (Specific, Measurable, Achievable, Relevant, Trackable, Ethical, Supported, Time-bound).
• ❓ Creating good KPIs involves asking key questions about desired outcomes, influence, responsibility, measurement, review timing, achievement recognition, and understanding.
• 🏢 Large organizations like Tesla may focus on a single critical metric, but complex organizations benefit from multiple KPIs to measure progress, track issues, and drive project performance.

Q & A

What are Key Performance Indicators (KPIs)?

Key Performance Indicators (KPIs) are quantifiable measures that help gauge the progress towards achieving specific business objectives or desired outcomes. They are crucial for tracking performance and guiding strategic decisions.

How do KPIs help in managing business performance?

KPIs provide measurable targets that focus efforts on achieving strategic and operational goals. They allow organizations to monitor performance, make informed decisions, and ensure alignment with business priorities.

What is the significance of Peter Drucker's quote in the context of KPIs?

Peter Drucker's quote, 'what gets measured, gets managed,' emphasizes that by measuring performance through KPIs, organizations are more likely to manage and improve their outcomes effectively.

What are proxy indicators in the context of KPIs?

Proxy indicators measure elements closely related to desired outcomes that are difficult to quantify directly. They stand in for the actual objectives and help in assessing progress towards those goals.

What is the difference between leading and lagging indicators?

Leading indicators predict future performance and show progress towards achieving goals, while lagging indicators measure the results after the work has been completed, reflecting past performance.

What are the six main characteristics of good KPIs?

Good KPIs should: 1) provide objective evidence of progress, 2) measure the right things for decision-making, 3) link to strategic imperatives, 4) track performance changes over time, 5) focus on what matters to the organization, and 6) be SMART (Significant, Measurable, Achievable, Relevant, Trackable, Ethical, Supported, and Time-bound).

Why is it important for KPIs to be specific and measurable?

KPIs need to be specific and measurable to provide clear, unbiased data on performance. This specificity ensures that progress can be accurately tracked and managed, avoiding subjective interpretation.

How can KPIs energize and engage project teams?

KPIs provide clear goals and benchmarks, which can motivate project teams by giving them targets to strive for and a tangible way to measure their progress and achievements.

What questions should be asked to create effective KPIs?

To create effective KPIs, ask: What are your desired outcomes? Why are these outcomes important? How can these outcomes be influenced? Who is responsible for each outcome? How can progress be measured? When will progress be reviewed? How will you know when the outcome is achieved? Who needs to understand the KPIs? What is the review process for the KPIs?

How does Tesla's approach to KPIs differ from that of large complex organizations?

Tesla focuses on a single, critical metric that aligns with their core objective, while large complex organizations use a broader set of KPIs to track various aspects of their performance and address diverse priorities across different areas.

Why is it important to review and update KPIs regularly?

Regularly reviewing and updating KPIs ensures they remain relevant and aligned with changing business goals and conditions. It helps in keeping the focus on current priorities and adapting to new challenges or opportunities.