Key performance indicators are quantifiable measures that are used to indicate an organisations success. To do this accurately they must reflect what have been identified by an organisation as its critical success factors. Although it's possible to measure many things, an important differentiator of key performance indicators is that they are the things that are essential to the organisation if it is to achieve its identified corporate goals.
Ultimately they can be used to measure an organisation's success, or lack of it. Quite often each part of an organisation will have identified its own success factors, which will have stemmed from a corporate strategy, and will then have developed its own key performance indicators.
An organisation may have identified the length of time it takes to answer an incoming customer phone call as a key performance indicator. This could then be reflected in the Customer Services Department setting the number of incoming customer calls answered within a specific time or specific number of rings as a key performance indicator.
In the education sector schools now have key performance indicators set for them by governments who have specific targets they wish to achieve. In UK primary education this may be reflected in the school being set a target of a certain percentage of children achieving level 4, in the statutory assessment tests, at age 11. This information is used to identify under-performing schools and forms the basis of school league tables - which can be seen as a measure of the way individual schools are performing in comparison with others.
An important consideration when setting the key performance indicators is that, once they are established, they remain consistent and are set with regard for the long term. Also, they should reflect a cross section of different measures across an organisation, in the same way that the balanced scorecard includes measures other than financial when assessing an organisation's performance.
The key performance indicators can become the sole focus of attention for an organisation, whether in the private or public sector. This may be beneficial in the short term if, for example, there is a particular issue that needs to be resolved. But, in the long term, to concentrate solely on a single measure of success can distort the way in which an organisation performs and is perceived. For example, with the education example, the only measure of success of a school (and pupil) is whether they have achieved a certain level by a certain age. But should this really be the only goal and measure of our schools and education system?
This is why, it can be argued, a true measure of success can only be in a situation where a number of different measures are used. In this way a more rounded and comprehensive view of all aspects of the organisation can be obtained.