The Basics of KPI Management

In Chapter 2 of High Output Management, Andrew Grove writes:

"Let's say that as a manager of the breakfast factory, you will work with five indicators to meet your production goals on a daily basis."

Here’s the first lesson for KPI management:

You’ll manage KPIs better when you cut the clutter and focus on what matters most.

Grove continues:

"Which five would they be? Put another way, which five pieces of information would you want to look at each day, immediately upon arriving at your office."

Another lesson:

KPIs are not long-term goals. They are guideposts toward those goals.

Andrew Grove was Intel’s third employee. He served as President, then CEO, then Chairman and CEO. IndustryWeek credits him with helping grow Intel’s market cap from $4B to $197B and scaling to 64,000+ employees. His focus was not just picking KPIs, but picking the right ones and building processes that use them to drive growth.

"The output of a manager is the output of the organizational units under his or her supervision."

With that in mind, here are five principles of KPI management.

1. Defining the KPIs you will manage

A reliable way to define KPIs is to tie them to goals using SMART criteria. Answer these five questions:

1. Is your objective Specific?
2. Can you Measure progress toward the goal?
3. Is the goal realistically Attainable?
4. How Relevant is the goal to your organization?
5. What is the Time frame for the goal?

Once goals are clear, choose the indicators that truly signal progress. Back to the breakfast factory example, Grove’s five were: Sales Forecast, Raw Material Inventory, Equipment Condition, Manpower, and Quality Indicators. For inspiration by function, browse the KPI Examples library.

2. The beauty and curse of specialization

In Ash Maurya’s book, Scaling Lean: Mastering the Key Metrics for Startup Growth, he warns about the “curse of specialization.” Reorganizing into departments and tying each to local metrics brings focus, yet it can bury cross-functional KPIs or the bigger business goal.

When deliverables live in silos, and teams chase different internal KPIs, overall throughput can suffer. Strike a balance between departmental focus and cross-team collaboration.

3. Communicating the why and the how

As a KPI manager, your job is to communicate both the why and the how.

• Why: Use Simon Sinek’s idea as a prompt for how you communicate with the team. Explain not just what to do, but why it matters.
• How: Define the operating model. Answer these three questions and make the answers obvious:

1. What’s our process for pursuing each KPI?
2. Who owns progress for each KPI?
3. How will we present and share these KPIs?

Watch: Start With Why by Simon Sinek.

4. Understanding KPI dashboards

KPI dashboards and reports give real-time snapshots that help managers assess progress and share updates via email, live links, TV, or PDF. That said, as Joel Shapiro notes in Harvard Business Review, dashboards can miss nuance and context.

Most dashboards describe what happened. They rarely predict what will happen or prescribe next steps. Tools are improving, yet sound KPI management still requires human judgment. Use dashboards, and review them with intent. For ideas, see the Resources Hub.

5. KPI pairing for better management

Back to Grove’s breakfast factory. Reviewing KPIs frequently helps you correct course. Beware of overreacting to a single metric. Pairing KPIs creates a counter-balance.

"In the inventory example, you need to monitor both inventory levels and the incidence of shortages. A rise in the latter will obviously lead you to do things to keep inventories from becoming too low."

KPI management: Learn how to let it go

KPI management evolves. The KPIs you track now may not be the KPIs you need three months from now. Letting go is part of the work.

If you feel like this while monitoring your KPIs, it may be time to prune a few:

The challenges of letting go

Why is it hard to drop KPIs? Some KPIs helped you grow, so there’s attachment. Others need a lower priority, not a full retirement. Sometimes the missing piece is a framework.

For example, with SaaS KPIs, Allan Wille groups the most relevant into three buckets: Product, Growth, and Efficiency. If you’re entering a SaaS growth phase, over-weighting Efficiency may slow you down.

As KPIs pile up, focus drifts. Days spent tracking three become days spent wrangling seven. Each new KPI is a tug on a ball of yarn. Keep pulling and you’ll meet a knot.

The purpose of KPI management

KPI management is about understanding performance and nudging the future.

Your KPIs should show current performance and point the way to next actions.

Say you’re a sales manager and Sales Per Rep is the most important KPI.

If every rep consistently beats target, you may need new targets, a new hire, or both. When the growth engine hums, attention may shift from Sales Per Rep to an efficiency metric like Customer Lifetime Value to Customer Acquisition Ratio.

How to let go of KPIs

Think “see you later,” not “goodbye.” Keep retired KPIs visible but deprioritized. Use this quick loop:

1. Monitor your KPIs
2. Routinely and honestly question their worth
3. Discuss those questions with the team
4. Stay patient, stay open to change

Final thoughts on KPI management

On the surface, KPIs look like simple math. Underneath sits the real craft: choosing the right indicators, managing toward them, and building a culture where KPI reviews are a habit.

Make it a weekly ritual to ask: If you had to choose one KPI today, what would it be?

Related reads

• Why KPIs fail
• 17 KPIs every data-driven manager needs to lead their team

Lead image: from page 6 of Ash Maurya’s Scaling Lean: Mastering the Key Metrics for Startup Growth

This blog was updated from its original post date of June 25, 2017.

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