The Right (and Wrong) Ways to Track Your Company's PerformanceKnow what to look for to know if you're progressing toward your goals.

Key performance indicators, orKPIs, are the data used to chart a business on its way to success and profits. They're often used when revenue-starved startups need to identify ways to measure progress in the absence of cash flow. But there's a big risk: If you choose the wrong KPIs, you may drive your company to financial ruin.

So, how to pick? Identify yourbusiness goalsand the activities that lead directly to achieving them. And keep in mind that more often than not, bad KPIs are the result of upper management and the board deciding what to track. You're better off listening to frontline employees; they'll give you more granular KPIs that truly show you how the company is doing. (See the chart below for some starter ideas.)

Turn bad KPIs into good ones