The Executive Playbook for Defining KPIs That Actually Drive Performance
Most KPIs measure activity, not impact. Dashboards overflow with numbers showing how busy teams are, but not whether they’re moving the business forward. Leaders don’t need more metrics, they need better ones.
This playbook explains how to design KPIs that drive performance, align teams, and give boards clarity.
1. The Five Tests of a Meaningful KPI
A KPI only matters if it changes how people act. To test whether a metric is worth keeping, run it through five questions:
1. Is it aligned with strategy?
Every KPI must link directly to a strategic objective. If it doesn’t support growth, efficiency, or risk control, it’s a distraction.
Example: tracking “number of meetings held” says nothing about whether customer churn is improving.
2. Is it within someone’s control?
Teams should be accountable for what they can influence. If success depends entirely on external factors, like currency fluctuations, it’s not a performance measure; it’s a weather report.
3. Is it measurable with consistent data?
Data must be reliable, repeatable, and comparable over time. A metric that changes based on how it’s collected creates noise instead of insight.
4. Is it actionable?
If the number moves, can someone take a clear action? KPIs that describe outcomes but don’t guide behaviour belong in reports, not scorecards.
5. Is it time-bound and comparable?
A useful KPI shows progress over time. Without a timeframe or benchmark, it’s just a number on a slide.
A KPI that passes all five tests becomes a decision tool, not a reporting burden.
2. Remove Vanity Metrics Before They Distract You
Vanity metrics make teams feel productive but tell leaders nothing about business value. They measure volume, not impact.
Common examples:
Number of meetings held
Website visits without conversion data
Training hours logged without performance improvement
Projects completed without benefit realisation
To eliminate them, ask:
“If this number changes, would we act differently?”
If the answer is no, it’s not a KPI: it’s noise.
Replace vanity metrics with value metrics that show real progress:
From “number of customer calls” → “customer retention rate”
From “projects delivered” → “benefits realised”
From “training sessions held” → “capability improvement score”
Real-world example:
A telecom operator tracked “innovation workshops held” to prove agility. But when they switched to “percentage of new services generating revenue within six months,” performance became measurable, and accountability real.
3. What Boards Should Track vs What Teams Should Track
Boards and management often use the same word, KPI, but mean different things. Mixing strategic and operational metrics creates noise, duplication, and reporting fatigue.
Boards should track:
Strategic outcomes: growth, profitability, market share
Risk indicators: compliance, cybersecurity, talent stability
Long-term health metrics: culture, innovation pipeline, reputation
Executives and teams should track:
Operational drivers influencing those outcomes
Process efficiency, customer response times, quality indicators
Short-term leading signals of risk or opportunity
A clear KPI hierarchy keeps everyone focused. Boards look at results. Teams look at levers. Executives translate between the two.
4. One Simple Formula for Designing KPIs That Matter
Every KPI should fit this structure:
Action + Object + Outcome + Timeframe
Examples:
Increase recurring revenue by 10% within 12 months
Reduce customer onboarding time to under 5 days by Q3
Improve employee engagement scores by 15 points this year
This formula forces clarity on who acts, what success looks like, and when it should happen. If a KPI can’t be written this way, it’s too vague to drive performance.
5. Turning Metrics Into Momentum
When KPIs are clear, measurable, and owned, they stop being reports and start driving behaviour. The right metrics align strategy, execution, and accountability.
Boards gain visibility.
Leaders gain focus.
Teams gain purpose.
KPIs aren’t just data points. They’re governance tools that show whether leadership is steering or just observing.
Stop counting what’s easy to measure. Start measuring what actually drives value.