What is a KPI (Key Performance Indicator)?

Understand how KPIs measure success across teams and industries with clear, actionable insights.

Ceyhun Enki Aksan Entrepreneur, Maker

Sep 14, 2025

A term frequently mentioned in articles about dashboard interfaces, and commonly used in company-specific dashboards, as well as in discussions about goals and achievements/failures, is KPI (Key Performance Indicator) or its Turkish equivalent, Key/Basic Performance Indicator.

KPI (Key Performance Indicator)

KPI (Key Performance Indicator) generally refers to values established to enable systematic measurement of objectives. The concept of success may be subjective and context-dependent, varying with the situation and time¹. However, when the elements that constitute success are measurable and comparable, success becomes independent of time and context. A company’s goal might be to grow, but the success of its individual sub-organizations forms the foundation upon which the company’s overall performance is built. Therefore, success must be defined by measuring different elements at various levels and contexts. Otherwise, we cannot assume that every sub-organization is performing successfully just because the company as a whole is performing well. For this reason, organizations at every level establish metrics to evaluate their position in relation to their goals. These metrics can be described as either high-level or low-level KPIs, depending on the organizational level².

Let’s take an example. A company’s overall performance is expressed through a high-level (integrative/generic) KPI. This is because it represents the performance of many subordinate units and shows whether the established strategies are successful or not over a broad time frame. Low-level KPIs, on the other hand, are related to department-specific areas such as sales and marketing, and are updated more frequently depending on the situation. The term “target” is also frequently used instead of KPI. However, a target merely indicates a direction. A KPI, on the other hand, is concerned with the measurability (distance) of that direction. While a target might be a general expression such as “grow,” a KPI must provide a calculable definition based on historical data and achieved metrics³.

Performance Indicators and Measurability

The actions performed by the components that constitute a system can be measured based on the results they produce over time. This could include the number of actions a machine performs per unit of time, the tasks completed by an employee during the application development process, or the products sold or expenditures made. Thus, by considering historical data, these metrics can be adapted to serve as a foundation for strategic decisions. As a result,

managers can track employee, team, and/or department performance in a clear and direct manner,
performance can be expressed as success or failure, enabling targeted actions,
new strategies or modifications to existing strategies can be determined based on target levels,
resources can be managed more effectively.

The above outputs can, of course, be divided into sub-items based on the individual, team, department, or organizational level. For example, a sales team and a product development team will base their success metrics on different criteria⁴. The sales team’s performance can be evaluated over shorter timeframes, while the product development team’s performance will be assessed over different time periods. The commonly used method for such evaluations is the Balanced Scorecard.

Balanced Scorecard

There are numerous methods available for organizational management to assess performance, one of which is the Balanced Scorecard. In Turkish, the Balanced Scorecard may be referred to as the “balanced results card” or “corporate dashboard.” This method enables the evaluation of the metrics we obtain in conjunction with other influencing factors. This is because, in addition to financial data and figures, non-quantifiable psychological values (internal values), such as customer relationships, operational efficiency, innovation capability, product and/or service quality, employee performance and motivation, and the effectiveness and efficiency of information and communication technologies, can also influence the definition of success or failure.

These internal values (vision and strategies) are examined under four main perspectives:

Finance
Customer
Internal Business Processes
Learning and Growth

Finance

Indicates whether the company’s strategies are being effectively implemented and shows their impact on operational outcomes (profitability or loss).

Customer

Focuses on the continuity and need for improvement of customer satisfaction. It emphasizes the importance of incorporating the customer dimension into all strategies and management plans.

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Learning and Development

It emphasizes that organizational leaders should contribute to the development of their employees’ skills and capabilities. Employee motivation can be examined in contexts such as information technology infrastructure and applications, team cohesion, motivation-authority alignment, and organizational culture. Continuity in employee satisfaction must be maintained and continuously improved.

KPI Examples

As frequently highlighted in the above explanations, different KPIs will be relevant at individual, flow, department, and organizational levels. For example, the following are a few KPIs at individual and organizational levels:

Number of new customers
Number of duplicate transactions
Continuous service uptime
Annual revenue growth rate
Percentage of accurate customer data entry into systems

Key KPIs

Below are two KPIs that are frequently mentioned⁵.

ROI (Return on Investment)

ROI (Return on Investment) is defined as the return on an investment. In simple terms, it is the what did I spend and what did I gain metric. For instance, if you spent 1,000 TL on advertisements for your e-commerce website and earned 1,500 TL through customers acquired via those advertisements, you would achieve a ROI of 1,500/1,000 = 1.5, or 150%.

CR (Conversion Rate) is a metric that measures the percentage of website visitors who complete a sale or achieve another predefined goal. For example, if out of 1,000 visitors to your website, only two purchase a product, then the conversion rate (CR) for the sale is 2/1,000 = 0.2%.

KPI and Measurability

When setting a measurable goal based on KPIs, ignoring certain metrics and the internal inconsistencies mentioned earlier will prevent KPIs from reaching meaningful outcomes, leading to incorrect decisions and the implementation of flawed strategies. Therefore, when a goal is established using KPIs, the process of achieving that goal should also be monitored. In such phased approaches, general dashboards or summary-style indicators can be used to provide an overall view or snapshot of performance. This enables the identification of differences between lagging and leading indicators, allowing for appropriate actions to be taken.

Let’s illustrate this with an example of a walking activity.

You have defined a route and plan to reach the endpoint from the starting point within a specific day. Your past walking performance—such as the maximum distance you can walk daily, your average speed, etc.—acts as a lagging indicator because it reflects your past performance. The distance you cover daily, on the other hand, serves as a leading indicator, as the distance between your start and end points and the daily distance you are capable of walking are predetermined. Based on these, you can evaluate your progress against your goal on a daily basis and observe your performance or lack thereof.

Goal: Walking 100 km over 5 days

Performance: Walking an average of 20 km per day

Now, I will present a method that can be followed when setting this goal.

SMART

Let’s begin with the most important question: What is your primary KPI?. After that, you can determine the other secondary KPIs related to this primary KPI¹.

When defining KPIs, as I illustrated earlier, the key elements are measurable, predictable, and preventable. At this stage, methods such as SMART can serve as guiding principles. To define a KPI using the SMART method, you must provide clear answers to the questions listed under each section.

Specific
: Is your goal clear and specific?

Measurable
: Can the process and performance be measured?

Achievable
: Is the goal realistic? Can it be attained when compared to your past performance?

Relevant
: Does the goal align with the organization’s objectives?

Time-Bound
: Is the defined time frame appropriate for achieving the goal?

You can also apply this method when creating a dashboard. A general summary can be presented on the first page and at the top. Then, you can proceed to other KPIs in order of importance, using appropriate indicators⁶.

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