Key Performance Indicator (KPI)

Key Performance Indicator is a:

quantifiable measurement used to gauge an organization's overall long-term performance.

KPI can be measured in many different ways including the following:

1. Count: total number of a collection of items e.g. total sales number, total number of applications, total number of IT employees. It is the simplest of KPIs.

2. Sum: the total amount resulting from the addition of two or more number e.g. sum of IT expenditure, sum of sales amount

3. Average: sum of two or more numbers divided by total count e.g. average IT expenditure per employee

4. Percentage: is a number or ratio expressed as a fraction of 100 e.g. percentage of applications which have excellent Apdex score, percentage of business outcomes which are not achieved, gross margin percent

5. Ratio: measuring sizes of two quantities compared to each other e.g. IT support employees per thousand end users, IT Expense per Employee, ratio of automatic vs manual deployments

Business outcomes are measured through KPIs. For example if a target business outcome is to increase the number of applications on cloud within a year a relevant KPI can be "percent of applications on cloud services"

figure 1: examples of different types of KPIs

Balanced Scorecard (BSC) is a popular approach for strategic business management using KPIs. BSC provides four basic viewpoints or perspectives to categorize KPIs. There are four basic viewpoints or perspectives to take with the KPI balanced scorecard:

1. Financial perspective to track financial performance

2. Customer perspective to track customer satisfaction, attitudes, and market share goals.

3. Internal process perspective to track internal operational goals necessary to support above perspectives

4. The learning and growth perspective track human capital, organizational capital, training, informational systems, etc.

Types of KPIs

Indicators are usually categorized into leading or lagging indicators.

Leading indicators, as the name suggests, tell you about results to come. For example if you generating a healthy number of leads then it indicates that it may result into good sales numbers for the month. Examples of leading indicators are: how many employees certified on cloud, how many opportunities won or lost, how many people wearing masks etc.

Lagging indicators, as the name suggests, tell you about actual results. Examples are how many applications migrated to cloud, sales for the month, number of COVID-19 cases.

COVID-19 indicators provide a good example:

Leading	Lagging
Number of people vaccinated	Number of people infected
Number of people wearing masks	Number of people hospitalized
Number of people traveling	Number of deaths
Number of people practicing social distancing