KPIs: What Gets Measured Gets Managed

Many businesses have targets. Fewer businesses have effective performance management systems. A target tells you where you want to go. A KPI helps you understand whether you are moving in the right direction.

Not Every Number Is a KPI

A KPI should help management answer a meaningful business question across departments:

• Sales: Revenue, Conversion rate, Average order value, New vs Repeat customers, Sales pipeline
• Finance: Gross margin, Net margin, Receivable days, Cash conversion, Working capital
• Operations: Productivity, Error rate, On-time completion, Wastage, Customer complaints
• People: Attendance, Employee productivity, Training completion, Attrition, Role-wise performance

The KPI Management Cycle

A useful performance cycle is: Target → Actual → Gap → Reason → Corrective Action → Review.

If the target is ₹10 lakh and actual sales are ₹8 lakh, the management question should not simply be “Why did we miss the target?”

The better questions are:

• Where did the gap occur?
• Which product/category/customer/branch caused it?
• What was the expected activity vs actual execution?
• What action will close the gap, who owns it, and when will it be reviewed?

A dashboard is useful only when it changes management behaviour. The purpose of a KPI is not to create more numbers—it is to create better decisions.