Excellent thoughts here from Dashboard Spy reader, Terry Brown (Director of Marketing at Klipfolio.com). His article is particularly helpful for KPI dashboard builders.

Anatomy of a KPI: From Raw Number to Clarity

The use of KPIs (Key Performance Indicators) is an integral part of business intelligence. The careful definition and use of a KPI, enable a business or department to monitor its progress against these goals.

Let’s use a simple scenario to take a raw number and turn it into a KPI that is concise, clear and has meaning.

Consider the finance department within a company. One of the key objectives is to reduce the amount of outstanding invoices to increase cash flow.

kpi demo

The overall objective is refined to: Reduce outstanding payables over 30 days to less than $30k.

kpi metric

They wish to compare the current metric to the historical average to indicate movement; trending up, down or unchanged.

kpi traffic lights

We now have a KPI that is not simply a number; we’ve added meaning and insight without adding complexity. Where the above KPI is mean for at-a-glance awareness, tooltips and hover-over states can provide additional context to the metric as seen in step 5.

kpi historic values

This example highlights the key characteristics of a KPI: it is relevant and associated with a high-level goal for the company; it can be measured as a numeric value, one that provides context, from an operational system. It is tied to a group/departments activity; they are accountable to take action to keep the KPI within the identified thresholds.

Alternative visualizations of the above

kpi sparkline

There is significant research regarding which metrics matter to specific industries. However, it is important to understand that the performance indicators that are key for an individual organization cannot be dictated by an out-of-the-box solution. They vary depending on the industry, the functional area of the company, and the unique needs and focus of the organization. Contact us at Klipfolio.