What is KPI (Key Performance Indicator)?

A KPI (key performance indicator) is one of a small number of measures a team agrees to judge its performance by, each tied to a goal, with a target and a time period, such as qualified pipeline created per quarter.

At a glance

• A metric measures something. A KPI is a metric you’ve chosen to run the business on, with a target attached.
• Good KPI sets mix leading indicators, which point to future results, with lagging indicators, which confirm results already achieved.
• In sales, common lagging KPIs are bookings, quota attainment and win rate. Common leading ones are meetings held and pipeline created.
• Fewer is better. A team that tracks 30 KPIs is really tracking none.
• Every KPI needs an owner and a definition everyone uses the same way.

How KPIs work

Start from the goal, then work back to what predicts it. If the goal is $2M in new ARR this year, the lagging KPI is new ARR booked. The leading KPIs are the things that have to happen months earlier for that to land: qualified opportunities created, pipeline coverage for next quarter, meetings held.

Each KPI then needs four things written down: what’s counted, where the number comes from, the target, and who owns it. “Meetings held” sounds obvious until two teams count no-shows differently.

Example (illustrative): an outbound team has a target of $600,000 in new pipeline a quarter. Its average qualified opportunity is $20,000, so it needs 30 opportunities. If about one in three held meetings becomes a qualified opportunity, the team needs roughly 90 held meetings, or about seven a week. That weekly number is the leading KPI the team lead watches, because by the time the pipeline number is short, the quarter is mostly gone.

Common KPI mistakes

• Measuring activity as if it were output. Dials and emails sent are inputs. They belong on a dashboard, not in the KPI set.
• Only lagging KPIs. Revenue and churn rate tell you how last quarter went, not how this one will.
• No shared definition. If marketing and sales define a qualified lead differently, the KPI starts an argument instead of a decision.
• Targets without a basis. A target should come from the conversion rates you actually see, not from what the plan needs.
• Too many. Harvard Business Review has written about management teams switching off in KPI reviews when the measures get sliced too many ways.

How KPIs show up in a revenue system

For the sales pods we run, the numbers each team is measured on are agreed in writing with the partner before day one, and the partner sees them every week. For a sales pod those are usually output numbers like meetings held, show rate and qualified pipeline, not activity counts. See how our sales pods work.

Terms that sit next to KPIs

On the cost side, CAC is the KPI that tells you what growth costs. Read it next to win rate and attainment, because a team can hit its pipeline KPI and still miss the quarter if deals stop closing.