What is not measured is hard to improve. But more indicators do not mean better management: a good indicator is one that helps make a decision. Its usefulness depends on how well it is chosen, defined and read, and on turning it from a figure in a report into a tool for continuous improvement.
What is an indicator, and what is a KPI?
An indicator is a measurable value that shows how far an objective is being met or how well a process is performing, such as the time taken to process a request or the share of files that are complete the first time. A key performance indicator (KPI) is one of a small number of indicators linked directly to the organization’s strategic objectives and worth the attention of senior management. Every KPI is an indicator, but not every indicator is a KPI.
A distinction is also made between raw data, the indicator that gives them meaning, and the target against which it is compared. The number of requests received is useful information, but it only becomes a performance indicator once it is linked to a clear objective.
Indicators can also be classified by their place in the value chain: input indicators, such as the resources allocated; process indicators, such as processing time; output indicators, such as the number of services delivered; and impact indicators, such as the change users experience in their situation.
What makes a good indicator
The SMART criteria, used for writing objectives, are commonly borrowed here. An indicator and its target should ideally be:
- specific: it measures one clear thing;
- measurable: with a known formula and data source;
- achievable: with a realistic target;
- relevant: linked to the organization’s objectives;
- time-bound: measured at regular intervals.
In addition, the cost of collecting the data should be reasonable, front-line staff should understand the indicator, and the team should be able to influence it.
Leading and lagging indicators
- Lagging indicators measure what has happened, such as the user satisfaction rate.
- Leading indicators measure what drives results, such as the share of staff trained in user reception.
Lagging indicators arrive late: by the time they show a decline, the damage is done. Leading indicators give early warning and allow action, but on their own they do not prove that results will follow. A balanced system therefore needs both, linked by an explicit assumption that is tested over time.
Balancing perspectives
Robert Kaplan and David Norton proposed the Balanced Scorecard, which looks at performance from four perspectives: financial, customer, internal processes, and learning and growth. The idea rests on a chain of cause-and-effect relationships: developing people’s capabilities improves processes, better processes raise user satisfaction, and this is reflected in results. In public and non-profit organizations the scorecard is usually adapted so that the mission and users come before the financial perspective. The general lesson is that success cannot be reduced to a single number.
The indicator card: a university faculty example
Each indicator has a card stating:
- its name and purpose
- the calculation method and unit of measurement
- the data source
- the measurement frequency
- the baseline and the target value
- the person responsible
Example: a university faculty sets itself the objective of improving first-year student success. It chooses a lagging indicator, the first-year pass rate, calculated by dividing the number of students who pass by the number actually enrolled, taken from the minutes of the examination boards, measured at the end of each semester and followed by the faculty’s head of studies. It adds two leading indicators: attendance at study-skills support sessions, and the time taken to return marked exam scripts to students. The target was not set by guesswork but after an initial measurement period used as the baseline.
From measurement to improvement: practical steps
- Start from the organization’s objectives, not from the data available.
- Choose a limited number of indicators per objective, combining lagging and leading indicators.
- Write a card for each indicator and agree on the calculation method before the first measurement.
- Collect baseline data before setting targets.
- Display the indicators on a simple dashboard and read them as trends over time, not as isolated figures.
- Discuss them in regular meetings and link each gap to an improvement plan following the PDCA logic.
- Review the indicators periodically and drop those that no longer inform any decision.
Reading an indicator means looking at its trend over successive periods and separating ordinary fluctuation from real change, which a control chart helps to do. It also means comparing it with the target and, where reliable benchmarks exist, with the results of similar organizations.
Common mistakes
- Measuring what is easy to measure instead of what really matters.
- Having so many indicators that the important ones get lost.
- Setting targets without a baseline.
- Keeping indicators with no owner and no decision attached.
- Changing the calculation method without documenting it, so that comparisons over time lose their meaning.
- Letting the indicator become an end in itself, so that people work on improving the number rather than the performance, a phenomenon known as Goodhart’s law.
An indicator that triggers neither discussion nor decision is just one more number.
