Choosing KPIs that help leaders make decisions
Updated 17 October 2026
When a dashboard contains forty indicators, ask which decisions would change if ten disappeared. The answer is a useful starting point for a review.
A key performance indicator should help leadership judge progress against an important objective. It earns its place through the question it answers. Adding a number because it is easy to obtain creates reporting work without necessarily improving a decision.
Distinguish the measure from the target
“Increase recurring revenue by 10% within twelve months” is a target. Recurring revenue growth is the measure. Leadership still needs an agreed definition, a starting point and an explanation of how the number will be calculated.
Without those details, two teams can report different results while both believe they are correct. Changes in scope, currency or customer classification can alter the figure as much as commercial performance.
An indicator also needs someone accountable for its definition and someone responsible for the business response. Those may be different people. The finance team can validate a margin calculation while a business executive owns the action required.
Specify enough to use the number
Consider this illustrative specification for a customer service objective.
Decision: Whether to change staffing or workflow to reduce overdue cases
Indicator: Percentage of eligible cases completed within five working days
Calculation: Eligible cases completed within the limit divided by all eligible completed cases
Scope and source: Agreed case types from the service system with exclusions documented
Baseline and target: Establish a validated baseline before setting the improvement target
Accountability: Service director owns the response and a named analyst checks the data
Review and escalation: Review monthly with an agreed threshold and response deadline
The specification makes the measure reproducible. It also exposes a weakness: a metric based only on completed cases can look healthy while an ageing backlog grows. Report outstanding cases and their age alongside it.
Ask what behaviour the target rewards
Reducing average handling time may encourage staff to finish cases quickly while passing unresolved work to another team. A sales target may reward revenue that carries weak margins or poor collection prospects.
Before approving an incentive, ask how someone could meet the target while making the business worse. Pair the measure with an appropriate check on quality, risk or cash. Keep the set small enough to interpret.
Some important indicators concern conditions management cannot control, such as market demand or supplier distress. They can still inform a decision. Be clear whether a measure assesses management performance or provides an early warning.
Give boards an interpretable view
Boards need results, relevant leading indicators and an explanation of material changes. Management needs more detail to run the business. The two views should use consistent definitions without becoming identical reports.
When an indicator moves outside the agreed range, the commentary should explain the likely cause, the limits of the evidence and the proposed response. A red cell without that explanation leaves directors to guess.
At the next dashboard review, choose one indicator and ask its owner to reproduce the calculation and describe the decision it supports. If either task is difficult, fix that measure before adding another.