KPI Quick Tip: When to use a Sum or Total vs an Average in your KPI formula

Though some might think this information is basic, you may be surprised with how often people use one formula when the other would provide better, more accurate insights. ?This can be particularly true when teams choose Sums or Totals without considering other options.?

When to use a Sum or Total in your KPI formula

Sums or Totals are most useful when you want to have quantities that go beyond values that are only integers (whole numbers). Unlike Counts, Sums and Totals are continuous variables and their values can be just about anything, including decimals. You use Sums or Totals when you are more interested in the rate of occurrence.??For example:

• Total time spent making sales calls
• Total sales revenue invoiced
• Non-recyclable mass sent to landfill

Similar to Counts,?if your population changes over time, Sums and Totals can be misleading?if the size of the scope or opportunity varies over time. If the total time spent making sales calls in both May and June is 45.25 hours, but the total number of sales calls in May is twice that of June, you’d probably assess performance differently.?

When to use an Average in your KPI formula

An Average is usually a Sum or Total divided by a Count of things or people upon which the Sum was based and are most useful when you are interested in understanding the overall level of the degree or extent to which a particular result is happening, and not just whether or not it’s happening.??For example:

• Average customer satisfaction rating
• Average days lost due to injuries per employee
• Average kilometres travelled ?
• Average delivery cycle time?

However, be aware of these 3 limitations of using Averages:

1. Small populations?can make your Average very volatile over time, making it appear more accurate than it really is; for example, sending a customer satisfaction survey to a subset of an already small population. Sending to only 5 of 30 workshop participants is likely not enough to be representative of that small population. ?You would be better off to send the survey to all the participants.
2. Outliers?can skew the results; for example, 1-2 employees having hundreds of days off work due to serious, but rare, injuries. Usually, it’s well accepted to leave outliers out of the Average calculation (noting this in your PuMP Step 3 measure description footnote).
3. Asymmetrical distributions?can skew your Average; for example, when most sales are between $100 and $1000, but there are quite a few that go as high as $10,000. In this case, a Median might be a better indicator of the ‘centre’ of the distribution.