KPI And KPD, Which One Is More Valuable?

Written by Joey Wang

When evaluating if an organization or company has meet its business goals or whether it is a successful engaged activity, many of them would like to set a series of metrics to measure performance, among which the most frequently used type is Key Performance Indicator (KPI) as a performance measurement to measure the progress. Generally speaking, key performance indicators are numbers that reflect the outcome, which deliver messages and provide feedback about companies’ business, but they don’t really tell how these occurred and why. In other words, indicators cannot be managed.

However, there is another type of performance metric called key performance driver (KPD), which is aligned to measure different aspects of the business progress that will directly influence results and outcomes. Or we can directly regard KPD as a metric to produce performance, which also means that you can easily figure out who made the largest contribution towards the success. Unlike KPI, KPD tells you why and gives you instructions about what to do next.

Thus we can understand the differences between KPI and KPD: KPD produces performance and KPI measures performance; KPI delivers feedback but KPD provides results; KPI are not manageable while KPD could be well managed. In hat case, here comes a question: which one is on earth more valuable?

Imagine if indicators inform you that your company fails to meet the goal, the first thing came to your mind is to identify issues, find out the reason and fix it, which means that you have to check the monitored KPDs, determine the best actions to correct the problems and improve the way your key drivers perform. Also, those presenting KPIs only represent your past performance and does not guarantee the future results, while when you look at KPDs, you will have a clear version about what to do next step and which part should be put more efforts on to optimize the performance and drive the possibility of success. In a word, KPDs capture information about what is exactly driving and stimulating a business operation and management. They proactively help companies identify processes that are in danger, and processes that are in alignment with companies’ best practices, which are the essential roles that KPIs cannot play. On the contrary, when proper KPDs set, the monitored KPIs will straightly tell you whether it works and reach the objectives or not.

Hence we could draw a conclusion about the relevance between KPI and KPD: KPIs are the numbers that are produced as an effort of the KPDs. In other words, KPDs are the key components in delivering the KPI’s. Without KPDs, we cannot get KPIs.

Therefore, it seems that KPDs are more valuable than KPIs, especially when a company wants to build and lead a practice that consistently performs at the upper levels of its potential, the pursuit for decisive and actionable business metrics should not begin and end with KPIs alone, but have to pay more attention on KPDs. However, looking at the corporates in China, most of them still stay at the stage that is preoccupied with performance indicators but fail to focus on and manage performance drivers, which indeed needs to be adjusted immediately. In a word, if you want to improve the performance and growth of you corporate, focus more on key performance drivers PLEASE!