Key performance indicators (KPIs) are measures organizations use to show whether they are making progress toward important goals. A KPI gives a priority a measurable form, such as a result or rate that people can track against a target. Organizations use KPIs at different levels, from company-wide objectives to department goals and individual responsibilities. A measure is useful when its definition and data help people make decisions about progress, not merely because a number appears on a report. A KPI is not the goal itself: the target describes the desired level, while the KPI records evidence that can be reviewed against it.
Table of Contents
- How Kpis Differ from Metrics and Targets
- Leading and Lagging Indicators
- How to Define a Useful Kpi
- How to Interpret and Act on Kpi Results
- Kpis in Employee and Contingent Workforce Decisions
How Kpis Differ from Metrics and Targets
A metric is a measurement, while a KPI is a metric chosen because it relates to a priority. For example, a service team might track the number of requests it receives. If its goal is to respond promptly, the share of requests answered within a defined period may be a KPI. Request volume remains useful context, but it does not directly show whether the response-time goal is being met.
A target sets the expected level for a KPI. A baseline records the starting point or a prior result, giving the team something to compare with. For example, a team could set a target for the percentage of requests answered within one business day and compare results with its baseline. These terms are related but not interchangeable: the KPI is the measure, the target is the desired result, and the baseline is the point of comparison.
KPIs are most useful when connected to a decision. A gap between the result and the target can signal a need to investigate, but it does not by itself explain the cause or prescribe a solution. Used as part of performance management, measures should guide attention toward the intended outcome rather than reward activity that improves a score while undermining the goal. For example, a team should not treat a higher number of completed requests as success if the increase comes at the expense of service quality.
Leading and Lagging Indicators
Lagging indicators describe outcomes that have already occurred. A quarterly turnover rate, for example, can show whether workforce stability changed during the period. It may not explain why people left, and it cannot prevent departures already counted. Lagging measures are still important because they help organizations assess results over time and compare outcomes with expectations.
Leading indicators track actions or conditions that may influence a later outcome. In workplace safety, the time taken to correct a reported hazard may provide an earlier signal about prevention efforts than injury records. OSHA explains that leading indicators can help organizations assess safety activities, while lagging indicators record events such as injuries that have already happened. Using both can show what actions are being taken and what outcomes follow. OSHA's guidance on leading indicators describes this complementary role.
A leading indicator is not proof that a desired outcome will happen. For instance, participation in a retention initiative does not establish that the initiative reduces turnover. Teams can test whether early measures are meaningfully associated with later results. A well-defined employee retention strategy may use leading measures to monitor implementation and lagging measures to assess workforce outcomes. Reviewing both kinds of indicators helps teams distinguish activity from the results that activity is intended to support.
How to Define a Useful Kpi
Begin with the decision the measure should support. Translate a broad aim such as improving onboarding into a specific outcome, such as reducing the time between an accepted offer and readiness to begin work. A different goal, such as improving the worker experience, requires different evidence. Selecting the measure only after clarifying the intended result helps keep the KPI relevant. It also makes it easier to explain why the measure matters to the people who collect or use the data.
Write down the calculation and its boundaries. Identify the data source and the people or cases included. Explain how exceptions are treated and what starts or stops the measurement period. For an onboarding-duration KPI, specify whether it counts calendar days or business days and how a missing approval affects the clock. Data from an HRIS can support reporting only when the relevant records are available and consistently maintained. A precise definition reduces the chance that different teams will calculate the same KPI in different ways.
Establish a baseline before choosing a target. Then decide who will review the result, how often it will be reviewed, and what decisions the review can inform. Measures should be clear and realistic, with data that can be collected reliably. The U.S. Office of Personnel Management describes several possible dimensions of performance measurement. These include quality, quantity, timeliness, and cost-effectiveness. Its guidance concerns federal performance standards, so it is a reference rather than a universal private-sector rule. OPM's performance standards guidance also emphasizes defining how a measure will be assessed.
How to Interpret and Act on Kpi Results
Choose a review schedule that fits the pace of the work and the time available to respond. A rapidly changing service process may warrant frequent review, while a long-term objective may require a broader view. A useful report presents the result alongside its target and relevant earlier results. That context helps readers see whether performance is changing rather than treating one number as a complete story. It can also make unusual shifts easier to spot and investigate.
Investigate before assigning a cause. A longer completion time might reflect more complex cases rather than poorer performance. Check that the data is complete and that comparisons involve similar work or populations. If the KPI definition changes, record the change so readers understand whether results from different periods remain comparable. Otherwise, a change in the calculation could be mistaken for a real change in performance.
Every review should connect the finding to a possible action. A process bottleneck might call for redesign, clearer ownership, or a change management effort rather than simply a more demanding target. Record decisions and follow-up so the measure supports learning. Avoid changing a target after results arrive without documenting why, since that can make the original expectation difficult to assess. Revisit the KPI itself when it no longer helps people make decisions about the goal.
Kpis in Employee and Contingent Workforce Decisions
When a KPI is used to discuss individual performance, it should relate to work the person can meaningfully influence. A shared business result may depend on multiple teams and should not automatically be assigned to one person. Expectations are easier to understand when measures are explained before the period being assessed. A performance review can consider results alongside the circumstances that shaped them. Clear expectations also make it easier to discuss what support or changes may be needed.
Numerical measures may miss quality or important work that is difficult to count. A target based only on speed could encourage rushed work if accuracy is not considered. OPM's guidance identifies quality as a possible performance dimension alongside other measures such as quantity and timeliness. The principle is useful beyond its federal context. A competency-based performance appraisal can offer additional evidence about skills and work behaviors rather than relying on a dashboard score alone.
For contingent workforce programs, KPIs can help identify where a process needs attention and distinguish process performance from a worker's performance. For example, measuring the time from receipt of a complete assignment request to onboarding readiness can reveal delays before a worker starts. The definition should state how client approvals or incomplete information affect the clock. Compare assignments with similar requirements and pair speed with evidence that necessary onboarding steps were completed.
Links between a contingent workforce program and its measures are most useful when each KPI has a clear owner and the relevant parties can act on the results. At TCWGlobal, this context helps organizations focus workforce reporting on defined program objectives rather than treating raw activity counts as proof of success. A well-defined measure can help program stakeholders identify process delays and discuss improvements using a shared understanding of what the KPI records.
