Data and key performance indicators (KPIs) are essential business tools. KPIs help organisations understand how well they are performing in relation to their strategic goals and objectives. Data is the ‘raw material’ that feeds KPIs as well as any business intelligence project or data analysis.
Organisations collect data and key performance indicators (KPIs) to gain insights and inform decision-making.
Data and KPIs are used to provide insights into the performance levels of an organisation. Data on its own is worth little. It needs the strategic context in order to be relevant and meaningful. Most companies are trying to reduce the complex nature of their business by creating a small number of key indicators in order to make performance more understandable and digestible. This is the same approach we use in our daily lives. For example, when you go to your doctor he might measure blood pressure, cholesterol levels, heart rate and your body mass index as key indicators of your health. With KPIs we are trying to do the same in our organisations.
In practice, the term KPI is very much overused. For many it describes any form of measurement data and performance metrics used to measure business performance. Instead of clearly identifying the information needs and then carefully designing the most appropriate indicators to assess performance, companies end up measuring and reporting everything that is easy to count with little or no real business insights.
A good starting point for developing more relevant sets of data and KPIs are your strategic goals and the management questions you want to have an answer to. If you can articulate the questions you need to have an answer to then they will point you to the right KPIs and data that you will need to collect to answer your questions.
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Update History
- 07 Jun 2014 (12: 00 AM BST)
- First published
- 04 Jul 2023 (12: 00 AM BST)
- Page updated with Latest research section, adding further reading on KPIs. These new resources provide fresh insights, case studies and perspectives on this topic. Please note that the original overview from 2014 has not undergone any review or updates.