What is a key performance indicator (KPI)?

A key performance indicator (KPI) is essentially a measurable value that demonstrates how effectively an organization is achieving its key business objectives. By definition, KPIs are used to evaluate success at reaching targets, meaning they have quantifiable metrics attached to them. This could include metrics like sales growth, service response times, or customer retention rates—each of which can be measured to assess levels of achievement in relation to strategic goals.

For example, if a company aims to increase its market share, a KPI might be the percentage increase in sales over a specific period. This measurable value directly relates to performance and can provide insights into how well the organization is progressing toward its objectives.

Other options provided do not capture the essence of a KPI. Qualitative measures may assess performance but lack the measurable aspect that defines KPIs. Estimated costs pertain to financial planning and do not directly indicate performance against objectives. General suggestions for improvement are too vague and do not provide specific metrics or measurements necessary to evaluate success.