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How To Define KPIs

Key performance indicators measure real-time performance and results of past activity.
KPIs are critical metrics that measure actual performance against predefined goals and objectives. There are typically two types of key performance indicators. The first measures real-time performance or predicts future results. These are helpful in ensuring that critical objectives aren't missed. An example may be an IT organization that needs to have 80% of its staff working on active projects. If the system determines that next month there will be a slowdown of project activity and the utilization rate will be only 70%, this allows time to adjust staffing or add more projects.

The second type of KPI measures results of past activity. These indicators are like a report card to see how you did in a particular area. For example, if your IT organization manages critical applications such as PeopleSoft, SAP, and Exchange and you have committed to an overall application availability rate of 99%, you can set a KPI that will measure the health of these apps. This is done by monitoring health and performance and then correlating that data.

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Often you will find that other metrics are helpful in managing the IT organizations, but they may not be "key." It's helpful to group these metrics as well so you can remain focused on the issues that really affect the organization.

Illustration by Sek Leung

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