The KPI Terminology Problem — And How to Solve It in Your Organisation

KPI, metric, measure, indicator — no two organisations define them the same way. Here’s why that causes real problems, and how to fix it.

If you’ve ever sat in a strategy or performance meeting where one person’s “KPI” is a target, another’s is a project milestone, and a third’s is a vague strategic priority — you’ve experienced the KPI terminology problem firsthand.

It’s not only annoying, but it directly undermines performance conversations, wasting meeting time, and making it harder to arrive at a shared understanding of and agreement on whether performance is heading in the right direction.

Why KPI terminology will never be standardised

The performance management field uses dozens of overlapping terms — KPI, metric, performance indicator, key result indicator, measure, lead indicator, lag indicator — and no two authorities define them the same way.

David Parmenter, author of Key Performance Indicators, draws careful distinctions between KRIs (which tell you how you’ve done), PIs (which tell you what to do), and KPIs (which tell you what to do to increase performance dramatically). Many other practitioners use “KPI” to mean any quantitative measure at all. Others use it to mean a qualitative goal — and will say things like “we need to measure our KPIs”, which conflates a goal with the measure of it entirely.

There is no universal standard, and there never will be. Every consultant brings their own vocabulary. Every framework — OKRs, Balanced Scorecard, PRINCE2, ISO — introduces its own terms. Waiting for the industry to agree is not going to fix your organisation’s KPI confusion.

Here’s what really matters: the terminology problem only remains a real problem inside your organisation when the lack of definition is allowed to live on, unresolved.

The real cost of undefined terms

When your organisation hasn’t agreed on what these words mean, several things go wrong:

• People talk past each other. A discussion about whether a particular “KPI” is on track gets stuck because some think the KPI is the target, some think it’s the action, and only a few think it’s the measure.
• Reporting becomes inconsistent. Different teams use different labels for the same objects — and the same labels for different objects — making it difficult to compare, consolidate, or discuss performance across the organisation.
• New frameworks cause confusion. When someone introduces OKRs and asks whether a Key Result is the same as a KPI, nobody has a clear answer. The debate consumes energy that should go into actually measuring performance.

None of this is about being pedantic. It’s about the practical cost of unclear shared language in an environment where clear shared understanding is the whole point.

A map of the terms that matter

Rather than trying to resolve what the industry means by each term, it’s more useful to map out the objects that actually exist in a performance plan — and agree on what your organisation will call each one.

Here’s a simple example. Consider a not-for-profit organisation called HealthFirst, whose strategic plan contains the following components:

• A statement of the future they’re working toward (vision)
• A statement of what they exist to do (mission)
• The values they commit to working by (values)
• The specific results they need to achieve to fulfil the mission (performance results)
• The quantitative evidence they’ll use to track each result (performance measures)
• The level of performance they’re aiming to reach (targets)
• The broad areas their strategy is organised around (strategic themes)
• The projects and actions they’ll take to improve performance (improvement initiatives)

Every organisation has all of these objects in their planning — whether or not they’ve named them clearly. The terminology problem arises when different people are using different words for the same objects, or the same words for different objects.

Your job isn’t to match the industry’s definitions. It’s to agree internally on one word for each object, and use it consistently.

The one definition worth getting exactly right

Of all these objects, the performance measure is the one most worth defining with precision — because everything else in performance management depends on it being understood correctly.

After more than 30 years working with organisations on performance measurement, the most useful definition I’ve found is this one (my own):

“A performance measure is a quantification that provides objective evidence of the degree to which a performance result is occurring over time.”

This definition does what most don’t: it anchors a measure to a result (not an activity), requires it to be quantitative (not a qualitative label), and specifies that it must be tracked over time (not just snapped at a point in time).

In practice, a well-written performance measure has four components:

1. A statistic — average, number, percentage, rate
2. A performance attribute — what is being measured
3. A scope — what is included and excluded
4. A time dimension — week, month, quarter

So a measure looks like this:

New Referred Customers: Total number of new customers referred by an existing customer, by month.

Not “customer referrals” and not “referral KPI”. A real measure requires a full, unambiguous statement that anyone in the organisation can understand and use consistently.

For a deeper treatment of what this definition means in practice — and how to tell a meaningful KPI from a meaningless one — the KPI Fundamentals Guide: What is a KPI? is the place to start.

How to build a shared glossary in your organisation

Once you understand what the key objects are and how to define them, the practical step is to create a shared glossary — a simple reference document that records what each term means in your organisation’s context.

It doesn’t need to be long or formal. It needs to be:

• Agreed. Bring the right people together — typically the performance, strategy, and planning leads — and work through the terms you actually use. Where there’s disagreement, resolve it in the room. The goal is one definition per object, not the perfect definition.
• Written down. A one-page reference document, shared somewhere everyone can find it, is worth more than any number of verbal agreements. It becomes the arbiter when confusion arises.
• Used consistently. Introduce the glossary when new people join. Reference it when frameworks are introduced. Revisit it when your strategic planning cycle changes. Include it in your strategic plan. A glossary that sits in a folder and is never opened doesn’t solve anything.
• Explained, not enforced. The goal isn’t compliance — it’s shared understanding. When someone uses a term differently, the right response is a brief, curious conversation: “When you say KPI there, do you mean the measure or the target?” That question, asked consistently, does more to build shared language than any policy document.

The terminology will never be resolved at an industry level. But it can absolutely be resolved at an organisational level — and that’s the only resolution that actually matters for your performance conversations.

If you’re ready to go beyond terminology and understand what a meaningful KPI actually looks like, read the KPI Fundamentals Guide: What is a KPI?

Or if you’re asking a more fundamental question — why measure performance at all — Why Do We Need KPIs or Performance Measures? is the natural next read.

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