What is a KPI?

A KPI, or key performance indicator, is one of the few measures a business watches to judge whether it is on track. Wikipedia defines it as "a type of performance measurement used to evaluate the success of an organization, activity, project, or process in achieving defined objectives". The word that matters is key: a handful of measures, not a hundred.

Definitions

Each KPI needs a written definition: which volume, which cost, which date, which customers. Two sites reporting the same KPI name with different definitions are reporting different things.

What a KPI can hide

A KPI summarises, and summaries hide. From Quarri's own work with a lumber and millwork manufacturer: revenue grew 25%+ in a year while net revenue retention was about three quarters: losses and shrinking accounts were hidden by new business.

The same can happen in operations. Average recovery can rise because the log mix improved, not the sawing, and cost per unit can fall because volume rose while fixed costs grew.

The standard advice is known. Wikipedia's entry warns of "Tunnel vision", where focusing on measured indicators "can neglect unmeasured broader metrics", and suggests using "disaggregated data to reveal disparity". There is also Goodhart's law: "When a measure becomes a target, it ceases to be a good measure".

How to use KPIs well

Pairing every KPI with a second measure doubles what leadership watches. In our view, the better arrangement keeps the headline few and puts one check measure one step down: revenue with retention, recovery with log mix, cost per unit with total cost. Software can compute the check from the same records as the headline, so it is there when the headline moves. When a definition changes, restate the history so trends stay comparable.

What it isn't

A KPI isn't a target, though targets are set against KPIs. It isn't a dashboard, which displays KPIs.

Quarri for finance and strategy teams is built for the people who close the month, explain the margin and answer the board.

Quarri is an AI-native data platform for the timber supply chain. It connects buying, production, sales and inventory for forest management, sawmill, wood products and pulp, paper and packaging operators.