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I have read in many business books that KPIs should be only those metrics that directly relate to organizational strategic goals. Also that C-level people look at them and can act on them. According to those books, many people confuse KPIs with simple PIs.
So I am wondering, if I want to define some performance indicators for my processes in my department, I assume I should not call them KPIs?
Then how should I call metrics that are important for me (or people in my department?)

  • I usually just call them "metrics". What's the need for a formal name if just within a team? – Sarov Feb 20 '18 at 18:13
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TL;DR

Consider the source! Business books aimed at the C-suite or at the executive level probably only care about metrics that should roll up, but other levels will have other indicators that matter too. What makes a great indicator will therefore be very context-dependent.

Explanation

A Key Performance Indicator (KPI) should focus on the word key. It’s any metric that helps you quickly visualize the status of whatever you’re measuring, with a bias towards being an easy-to-read indicator of whether things are good or bad. With that said, what makes a KPI useful will vary tremendously between organizations, projects, and even the people viewing it. While the metric should be an objective measure, the value of the KPI is in how accurately it indicates what matters to the people who can do something about it.

At the executive level, KPIs are often strategic or financial in nature. For example, “Are we within 10% of our initial $20M budget?” might be a great strategic indicator of whether an initiative is financially on track.

At lower levels, “Are the widgets coming off the embiggening assembly line more than 25% larger than the ensmallened widgets?” might be a great indicator of how well a process or control is operating. This type of metric is key to monitoring process health, even if it’s not immediately visible in higher-level dashboards. So, while a C-level executive might not care about this particular metric, it doesn’t mean it isn’t a key indicator at the right level, nor that it can’t roll up into a higher-level indicator when necessary.

In other words, KPIs can (and probably should) exist at multiple levels, but the selection and implementation of the indicators will vary based on what’s important to track at any given level. Understand the context and the control objectives, and the right KPIs may become self-evident.

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Use the term at any level you desire. If you need to discriminate one KPI from another, then simply name them: Process Alpha KPIs.

If you own a process, let's say the F-35 assembly line, I'm pretty sure you'd have quite a few KPIs to monitor the health of your line, and if anyone else at LM would complain, you could tell them where to put their KPIs.

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    Well but that is using the term in a wrong way. The same is the fact that KPI is not financial, and yet many professionals use financial kpisb(when actually there is FPI) – John V Feb 20 '18 at 18:27
  • There are many schools of thoughts with everything and those schools evolve constantly. Terms come and go, people have their opinions about how to classify this or that, others disagree. We make things more complex by dividing these things up, and then someone says enough and makes them simpler again, only for someone else to make it more complex down the line. If a performance indicator is key to you for what you have as an accountability, then call it what you like. The name is less important than that you know what to do with it. – David Espina Feb 20 '18 at 18:51
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    I think the term KPI has become so overloaded that original distinctions have become all but useless. That shouldn't stop you from sticking to the "right" terms set by some authority if you want, but be aware others won't and you probably shouldn't expect them to. – Daniel Feb 20 '18 at 22:42

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