What is an important characteristic of a good Key Performance Indicator (KPI)?

A good Key Performance Indicator (KPI) is considered to be aligned with business goals effectively because it serves as a bridge between the organization's strategic objectives and operational activities. When a KPI aligns closely with the overarching goals of the business, it ensures that the metrics being tracked are relevant and meaningful to the specific objectives the organization is striving to achieve. This alignment helps teams understand how their performance impacts the broader success of the organization, fostering a focus on what's truly important.

While the other characteristics are also important for KPIs, they do not capture the essence of the essential relationship between KPIs and business goals as effectively as alignment. For example, actionable indicators are important as they provide insights that can prompt specific decisions or actions. Quantifiability is crucial for measuring progress objectively. Additionally, the idea of improving one measurement without harming others emphasizes the challenge of balancing multiple objectives. However, without the fundamental alignment to business goals, a KPI may lead efforts that do not contribute to or support the strategic direction of the organization, rendering it less effective overall. Thus, effective alignment is foundational for ensuring that KPIs drive performance toward desired outcomes.