What is a Key Performance Indicator?

I wonder is any of the consultants out there have worked on KPI's as I am developing an approach to business benefits planning in healthcare to smoke out the money (benefits) from implementing a software solution at NHS trusts.

I find the use of this term a little vague and overused when talking about measuring performance - because we can measure something it does not mean it is key. I have seen many KPI's systems set-up with indicators in the tens and hundreds - how can we hope to manage with such an overload of often conflicting measures - we need to focus on the important. To some extent the answer to my question is in the name. We can start with a definition of a key performance indicator being critical to the business, and if it is not delivered the business or project will fail. This focuses us immediately on a characteristic of a performance measure in that is it important has rank over other measures. The indicator must also measure some aspect of process performance that is relevant to the business

The first main point is thus to limit KPI's to those factors that are essential for the organization to reach its goals. The focus is important - keep the number of Key Performance Indicators small keeping everyone's attention focused on achieving the same KPIs. Also with too many irrelevant numbers to monitor it is easy to be distracted onto unimportant issues which may be easily resolvable but will add little to overall success.

That is not to say, for instance, that a company will have only three or four total KPIs in total. Rather there will be three or four Key Performance Indicators for the company and all the units within it will have three, four, or five KPIs that support the overall company goals and can be "rolled up" into them.

Cheers JB

Just as a contribution to the debate I spotted this on Wiki for the definition

Key Performance Indicators (KPI) are financial and non-financial metrics used to quantify objectives to reflect strategic performance of an organization. KPIs are used in Business Intelligence to assess the present state of the business and to prescribe a course of action. The act of monitoring KPIs in real-time is known as business activity monitoring. KPIs are frequently used to "value" difficult to measure activities such as the benefits of leadership development, engagement, service, and satisfaction. KPIs are typically tied to an organization's strategy (as exemplified through techniques such as the Balanced Scorecard).
The KPIs differ depending on the nature of the organization and the organization's strategy. They help an organization to measure progress towards their organizational goals, especially toward difficult to quantify knowledge-based processes.
A KPI is a key part of a measurable objective, which is made up of a direction, KPI, benchmark, target and time frame. For example: "Increase Average Revenue per Customer from £10 to £15 by EOY 2008". In this case, 'Average Revenue Per Customer' is the KPI.
KPIs should not be confused with a Critical Success Factor. For the example above, a critical success factor would be something that needs to be in place to achieve that objective; for example, a product launch.

Key performance indicators - Wikipedia, the free encyclopedia