Key performance indicators, or KPI, are a collection of quantifiable measures that are agreed upon in advance by stakeholders of an organization and that determine the success of the organization. KPI metrics should not only be measurable but also influence success.
Key performance indicators vary from organization to organization, depending on priorities and techniques of performance. A social organization can use the annual number of people it helps as a key indicator, a business' indicator may be the percentage income from its return customers, and a school can rely on the graduation and success rates of its students as key performance indicators.
An organization must first set its strategic and operational goals before deciding on the key performance indicators it intends to apply. If a firm intends to have the highest growth in the industry, then it may use annual growth of revenue as its key performance indicator. The organization should not only use the main performance metrics to measure its internal accomplishments, but also measure its performance against other firms in the industry. Players in a given industry should use the same metrics.
There should exist an appropriate way of measuring and defining the performance indicator, and the organization should use the same definition over a long period. A target should be set for each performance indicator.