Choosing the Right Metrics: CTQ, KPIs, and Beyond

In Lean Six Sigma and broader business improvement efforts, success is only as strong as the metrics that guide it. Organizations often measure a lot, but not everything they measure truly matters. Choosing the right metrics—those that align with customer needs and business strategy—is critical for driving meaningful results. This is where concepts like Critical to Quality (CTQ) and Key Performance Indicators (KPIs) come into play.

Why Metrics Matter

Metrics act as the compass for improvement initiatives. Without them, teams risk solving the wrong problems or investing resources where they won’t deliver value. The right metrics not only track progress but also influence behavior, ensuring teams focus on what matters most to customers and the business.

Critical to Quality (CTQ)

CTQs are the measurable attributes that directly reflect customer requirements. Derived from the Voice of the Customer (VOC), CTQs define what “quality” really means in the customer’s eyes. For example, in a call center, CTQs might include average wait time or first-call resolution rate. In a hospital, they could include medication accuracy or surgery turnaround time.

CTQs serve as a foundation for improvement projects because they translate customer needs into quantifiable, actionable goals. Without CTQs, organizations risk delivering outputs that meet internal standards but fail customer expectations.

Key Performance Indicators (KPIs)

KPIs, on the other hand, are broader measures that track organizational performance against strategic goals. They often extend beyond customer requirements to include financial, operational, and employee-related outcomes. Examples include on-time delivery percentage, operating margin, or employee retention rate.

While CTQs focus on customer-driven quality, KPIs give a holistic picture of how the business is performing. Effective Lean Six Sigma projects often use KPIs to demonstrate impact.

A Balanced Approach

To ensure comprehensive measurement, organizations should consider metrics across three dimensions:

1. Leading and Lagging Indicators

   • Leading indicators predict future performance (e.g., training completion rates).

   • Lagging indicators measure results after they occur (e.g., customer satisfaction scores).

   • Both are essential for proactive management.

2. Operational Metrics: These measure the efficiency and stability of processes, such as cycle time, defect rates, and throughput. They provide insight into daily performance and highlight improvement opportunities.

3. Strategic Metrics: These align with long-term organizational goals—like market share, sustainability targets, or innovation rates—ensuring that improvement projects deliver lasting business value.

Example in Practice

A Bank’s Loan Approval Process

• CTQ (Critical to Quality):

  • “Loan approval decisions must be communicated to the customer within 24 hours of application submission.”

  • This is a customer-driven requirement—speed of response is critical to customer satisfaction.

• KPI (Key Performance Indicator):

  • “Average loan approval cycle time = 18 hours.”

  • This is an internal performance metric used to measure how the process is performing against the CTQ.

Conclusion

Choosing the right metrics is not about measuring everything—it’s about measuring what matters. CTQs ensure the voice of the customer is heard. KPIs connect improvement to business strategy. And a balanced system of leading, lagging, operational, and strategic metrics ensures organizations don’t lose sight of the bigger picture. When organizations get metrics right, Lean Six Sigma projects deliver results that resonate not just within the process, but across the entire business.