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Key Performance Indicator (KPI)

A quantifiable metric used to monitor and evaluate how effectively a project or organization is meeting its objectives.

Key Points

  • KPIs are numeric measures tied to clearly defined objectives and success criteria.
  • Each KPI should have a formula, data source, target threshold, owner, and review cadence.
  • Use a balanced mix of leading (predictive) and lagging (outcome) indicators.
  • KPIs enable timely decisions, transparency, and continuous improvement.

Example

On an agile software project, the team tracks defect escape rate as a KPI: the percentage of defects discovered after release, with a target of under 2%. The data is pulled weekly from the issue tracker. When the rate exceeds the target, the team adds automated tests and improves code reviews to bring the metric back in range.

PMP Example Question

Which statement best describes a Key Performance Indicator (KPI) in an agile project?

  1. A qualitative observation of team morale captured in retrospectives.
  2. A quantifiable measure with a target used to monitor progress toward objectives.
  3. A hierarchical list of deliverables in the work breakdown structure.
  4. A predefined plan for addressing high-priority risks.

Correct Answer: B — A quantifiable measure with a target used to monitor progress toward objectives

Explanation: KPIs are numeric, goal-aligned metrics. Team morale is useful but not a KPI unless measured; the WBS and risk response plans are project artifacts, not performance indicators.

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