Choosing KPIs that matter: a guide to drive real business outcomes

Increasingly, organizations are starting to question the idea of measuring everything. Data fatigue may be the culprit, along with a combination of misalignment and ineffective results. You can’t improve what you’re not measuring—but measuring everything leads to fatigue. The solution is to narrow your focus to the key performance indicators (KPIs) which really matter. Many organizations fall into the trap of tracking vanity metrics—data that looks good but lacks business value—instead of focusing on actionable KPIs aligned with business outcomes. 

From vanity metrics to actionable business KPIs 

Vanity metrics may look impressive—like social media followers or app downloads—but they don’t inform decisions. Actionable metrics, on the other hand, provide insight you can act on, such as conversion rates or customer retention. Focus on key performance indicators that drive measurable business outcomes.

A business KPI is truly valuable when it:

• reflects key business objectives,
• is measurable over time,
• leads to specific actions,
• is supported by reliable and contextual data, and
• aligns with business outcomes.  

Align your teams around business KPIs 

Aligning your teams is foundational when working toward meaningful KPIs. When everyone understands the purpose behind the KPIs and how their roles contribute to achieving them, it fosters collaboration and accountability.  

We recently worked on a project intended to use agile project management. However, the client was still using a waterfall method for the project, managing information separately in Excel. While the consulting team used Kanban boards for sprints, the client applied the same data to a linear workflow. As a result, the information became meaningless without appropriate context. It was impossible to tell how the project was progressing. Deciding on a clear project management approach and ensuring team alignment is crucial. This experience highlighted a common pitfall: using agile tools without true alignment. Regular check-ins help maintain focus, surface challenges early, and build collaboration. 

Also, it’s important to be honest when it comes to project deadlines. Ironically, it’s a red flag for us when all the project status updates are green. Transparency around project deadlines is vital. When status updates show all green, it can create a false sense of security, masking underlying challenges until it’s too late to course correct. 

What makes KPIs strategic and actionable

Instead of tracking data that merely reflects activity, organizations should focus on indicators that demonstrate real progress toward business goals. These are metrics like:

• Customer retention
• Conversion rates
• Profit margin

As I like to say, keep it lean and clean when it comes to KPIs. It also helps to think about the KPIs that matter to different departments in your organization. Finance cares about different metrics than, say, HR or Marketing. It also keeps your dashboards simpler with less scrolling.  

Depending on your role, the KPIs that matter most will vary. HR cares about measuring employee engagement, which can help gauge the amount of internal support for your business strategy. High employee engagement can also greatly impact your company’s bottom line—increasing profitability by up to 23 percent, according to a workplace Gallup poll.  

Marketing focuses on measuring the ROI of initiatives to identify their most profitable tactics, allocate resources more effectively, and make decisions that maximize the budget. Measuring brand awareness goes beyond easily trackable metrics and connects with underlying elements, both quantitative and qualitative, that reflect the performance of your brand in the marketplace and inform your business decisions. This logic applies across the entire organization.

Here are some examples of strategic KPIs that organizations often use to measure progress toward their goals: 

Financial KPIs:

• Revenue growth: Tracks the increase in revenue over a specific period.
• Profit margin: Measures the percentage of revenue that turns into profit.
• Return on investment (ROI): Evaluates the profitability of an investment. 

Customer KPIs:

• Customer satisfaction score (CSAT): Gauges customer happiness with products or services.
• Net Promoter Score (NPS): Measures customer loyalty and likelihood to recommend.
• Customer retention rate: Tracks the percentage of customers retained over time. 

Operational KPIs:

• Average order fulfillment time: Measures efficiency in delivering products or services.
• Employee productivity: Assesses output per employee or team.
• Inventory turnover: Tracks how often inventory is sold and replaced. 

Growth KPIs:

• Market share: Indicates the percentage of an industry or market controlled by the organization.
• New customer acquisition rate: Measures the rate at which new customers are gained.
• Product development cycle time: Tracks the time taken to develop and launch new products. 

Sustainability KPIs:

• Carbon footprint: Measures the total greenhouse gas emissions produced.
• Energy efficiency: Tracks energy consumption relative to output.
• Waste reduction rate: Monitors the decrease in waste generated.  

These sustainability KPIs support broader environmental, social, and governance (ESG) goals. Learn more about how to develop an effective ESG reporting strategy that aligns with your organization’s values and measurable performance indicators.

How to prioritize KPIs that drive business outcomes

Assess which KPIs have the most significant impact on your success. Focus on metrics that influence critical areas like revenue, customer retention, or operational efficiency. Sometimes, we turn off reports for 30 days to see if anyone notices or requests them. It’s like putting unused items in a box for a month—if no one asks for them, you don’t need them.

Many organizations prioritize the KPIs that follow SMART criteria—Specific, Measurable, Achievable, Relevant, and Time-bound. This brings clarity and drives actionable insights. Collaborate with team members and stakeholders to identify the most relevant KPIs. Their input ensures alignment and buy-in. And regularly review your KPIs to ensure they remain relevant as goals and circumstances evolve. 

Lagging versus leading KPIs: what to track and why 

Lagging KPIs and leading KPIs serve different purposes but are both crucial for understanding and improving business performance. Here's a comparison to help clarify their roles: 

Leading performance indicators are early warning signs that help businesses stay agile, while lagging KPIs provide confirmation of results, ensuring organizations understand what worked or didn’t work. By combining both types, businesses can track real-time progress (leading) and ensure long-term alignment with goals (lagging). 

How the right business KPIs drive operational improvement 

Choosing the right KPIs will provide a clear framework for measuring success, identifying inefficiencies, and aligning efforts with strategic goals. By focusing on actionable and relevant metrics, organizations improve KPI tracking and make smarter data-driven decisions that enhance productivity, quality, and customer satisfaction.  

I had a telecommunications client years ago who started informing customers that they could move from traditional cable to modern technology such as fiber optic cable, wireless, and IP-based network equipment. They found that informing customers about new technologies prompted them to explore competitors and consider switching providers. Ironically, their marketing efforts unintentionally increased customer churn. They responded by mapping competitor offerings to identify strong candidates for targeted service promotions in each area. More targeted and strategic marketing with related KPIs ensured that the customer churn decreased. 

Keep your KPIs relevant: review, refine, repeat 

Revisiting KPIs regularly is crucial to keeping them aligned with evolving goals, market conditions, or business priorities. A periodic review cycle—quarterly or biannually, for instance—helps maintain the relevance of KPIs.  

It's also important to ensure your data sources remain relevant to your KPIs. For instance, if you move from a legacy to a modernized system, it might take a while before the new data flow results in meaningful information. As market conditions evolve, the data points that matter might shift. Ensure your data sources reflect these changes. For instance, if customer behavior has moved online, prioritize digital data over physical store interactions. Balance quantitative data with qualitative insights to verify the story your numbers are telling. For example, customer reviews and focus group feedback can add depth to what the data trends indicate. Invest in data analytics platforms or business intelligence tools to pull real-time, relevant data from various sources. 

Making KPIs work for your business outcomes 

Shifting from measuring everything to prioritizing key KPIs marks a move toward efficiency and smarter decision making. Traditional approaches often dilute focus by tracking too many internal metrics—missing critical signals tied to customer value and experience.

As discussed earlier, KPIs like customer satisfaction, churn rate, and lifetime value help organizations monitor what truly impacts retention, loyalty, and growth. By focusing on fewer but more meaningful indicators, companies can allocate resources more effectively and stay aligned with their strategic goals.

This evolution isn’t just about data—it’s about turning insight into action and building stronger connections with the people who matter most. Ready to apply this approach to your business goals? Contact us and let’s get started.