In his excellent article, KPIs are Metrics, but Not All Metrics are KPIs, Jared Spool states: “Finally, to be useful, the metric needs to predict the future — that’s what makes it an “Indicator.””
The last time I checked the dictionary definition of “indicator” it said:
in·di·ca·tor – noun
- a person or thing that indicates.
- a pointing or directing device, as a pointer on the dial of an instrument to show pressure, temperature, speed, volume, or the like.
- an instrument that indicates the condition of a machine or the like.
- an instrument for measuring and recording variations of pressure in the cylinder of an engine.
No mention of predicting the future there. In fact Key Performance Indicators can take two forms, “leading indicators”, which as Jared states – are used to predict the future, and “lagging indicators” which measure past performance.
Now I happen to agree with Jared that leading indicators, if you can discover them (it’s hard!), give you the most value – but that doesn’t mean you shouldn’t give any thought to lagging indicators. A powerful dashboard or scorecard technique is to define complimentary leading and lagging measures that show cause and effect, this can help you validate your indicator selection and give stakeholders confidence in your measurement framework.