What is a Key Performance Indicator? (KPI)
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Every KPI starts life off as a measure, presumably, a measure that is an indicator of company
performance. With each KPI, we assume that the company has established a target value –
goal – of what that indicator should be. For instance, sales revenue might be a performance
indicator. The goal might be to sell at least $100,000 in a given quarter.
The KPI will calculate the difference between the goal and the actual result. We assume the
company can assess those differences declaring them as either good, so-so, or bad. For
instance, the company may say, revenue > 100,000 is good, 90,000 to 100,000 is so-so, and
revenue less than 90,000 is bad.
This brings us to an essential distinguishing feature of the KPI: a graphical icon, known as an
indicator that is displayed to communicate the status of the KPI to the end user. That graphic
might be a happy face to show good, a neutral face to show so-so, and a frowning face to show
bad. Traffic lights with green, amber, and red are often used. The choice of graphics is up to
the client.
Setting up a KPI in Analysis Services entails computing a value of status. The difference
between the indicator and the goal is calculated, and the differences that are “good” are
mapped to the number 1, so-so to 0 and bad to -1. That number is the KPI’s status.
Optionally, you can define a trend for the KPI. The trend shows if, over time, the
performance measure has been moving upwards or downwards.