KPIs — Key Performance Indicators — are the metrics that matter most to an organization. They connect strategic objectives to measurable outcomes and give leadership a quantified view of whether the business is on track.
This guide covers KPIs vs metrics, how to design a framework, leading vs lagging indicators, department-level examples, common mistakes and how KPIs connect to EPM and planning.
KPIs vs Metrics
Every organization has hundreds of metrics. Revenue, headcount, customer count, website visits — all are metrics. A metric becomes a KPI when tied to a specific strategic objective and used to evaluate performance against it.
Revenue is a metric. Revenue growth rate vs the board-approved target is a KPI. KPIs require ownership, targets, thresholds and review cadence. Metrics just need measurement.
Designing a KPI Framework
Start with strategic objectives
KPIs cascade from the top. Each of the 3-5 strategic priorities should have at least one KPI measuring progress.
Balance leading and lagging
Lagging indicators (revenue, margin) show what happened. Leading indicators (pipeline, NPS) predict what will happen. You need both.
Set targets and thresholds
Every KPI needs a target (good), a threshold (concern) and a cadence (how often reviewed).
Assign ownership
Each KPI needs one accountable owner responsible for performance and explanation.
Keep it focused
5-8 KPIs per level. If everything is a KPI, nothing is.
KPIs by Department
Common KPI Mistakes
• Vanity metrics that look impressive but do not drive action.
• Too many KPIs — dilutes focus and overwhelms reporting.
• No targets — a KPI without a benchmark is just a number.
• Only lagging indicators — you cannot steer looking only backward.
• KPIs defined by finance in isolation — business leaders must co-own.
• Metrics never reviewed or acted upon — kills the program.