KPI Vs Metric

KPI and metric are different terms, but many professionals use them interchangeably, considering they are similar. However, both terms are different.

Therefore, I am writing this post to discuss and clarify the KPI Vs Metric

KPIs are key performance indicators; they are a set of metrics that help businesses track their performance, improve it and stay ahead of competitors. Metrics are data points used to measure KPIs.

What is a KPI?

A KPI, or Key Performance Indicator, is a metric used to measure and track progress. KPIs help businesses understand their performance and provide information on gaps where they can improve.

There are KPIs for every aspect of business, for example, sales, marketing, finance, operations, etc. To choose a KPI, understand what you will measure, then select the right metrics that align with your goals.

For example, if a specific goal is to increase sales, you might track KPIs such as conversion rate or customer lifetime value. You might track KPIs, such as Net Promoter Score or customer churn rate, to improve customer satisfaction.

KPIs are dynamic; they should be reviewed and updated regularly to ensure they align with business goals.

There are four main types of KPIs:

  1. Leading KPIs are predictive and show if future performance is on track. For example, a leading KPI for a sales team might be the number of sales-qualified leads generated per month.
  2. Lagging KPIs measure past performance and are used to assess whether goals have been met. For example, a lagging KPI for a marketing team might be the number of website visitors who converted into customers last month.
  3. Input KPIs measure the resources used to achieve results. For example, an input KPI for a manufacturing company might be the number of hours worked per week.
  4. Output KPIs measure the results of an organization’s actions. For example, an output KPI for a customer service team might be the monthly complaints resolved.

By tracking the right KPIs, you can gain valuable insights into the business performance and identify areas for improvement. However, note that KPIs are only one piece of the puzzle; they complement other data sources to get a complete picture.

The few most important KPIs for businesses are revenue, revenue growth, sales, sales growth, net profit margin, client conversion ratio (the percentage of leads that buy a product), etc.

What Are Metrics?

Metrics are the quantifiable measures of a business’s performance. They let track progress, assess effectiveness, and identify areas for improvement.

A metric is a quantifiable measure to track progress and evaluate success. For example, business metrics track progress and performance in areas critical to the business, e.g., sales, customers, employees, etc.

There are four main types of metrics: financial, customer, operational, and employee.

Financial metrics focus on a company’s bottom line, including revenue, profitability, and cash flow.

Customer metrics track customer satisfaction, engagement, and loyalty. Operational metrics measure a company’s efficiency and productivity. 

Employee metrics assess employee morale, retention, and engagement.

Each metric provides valuable insights into a company’s business performance. By tracking the right mix of metrics, you can identify areas of strength and weakness, set goals, and track progress.

While selecting metrics, avoid vanity metrics. Vanity metrics are indicators that may look good on paper but are not useful for providing information on future business strategies. Vanity metrics are superficial and can give a false sense of success or progress.

For example, social media followers. The number of followers on social media platforms like Facebook, Instagram, or Twitter can be misleading because it doesn’t indicate real engagement or conversions. People may follow you out of curiosity or to gain followers in return, without genuine interest in your business.

Relationship Between KPI and Metric

Metrics are crucial in defining and measuring KPIs. KPIs are strategic goals that organizations decide to assess their performance. They are the most critical aspects of a business’s performance that align with its objectives.

Metrics are specific measurements or data points that provide detailed information about activities or processes. Metrics help to quantify and track specific aspects of performance and provide the data to evaluate progress toward achieving KPIs.

The following points show the relationship between KPIs and Metrics:

  1. KPIs are derived from metrics: KPIs are established by selecting and aggregating relevant metrics. Metrics provide the data that help determine if KPIs are being met.
  2. Metrics contribute to KPI calculation: KPIs are often calculated using a combination of different metrics. For example, a customer satisfaction KPI may be calculated based on metrics such as Net Promoter Score (NPS), customer feedback ratings, or customer retention rates. Metrics are the building blocks for evaluating KPI performance.
  3. Metrics inform KPI evaluation and adjustment: Monitoring metrics enable organizations to assess their progress toward KPIs. Organizations must take corrective actions or adjust their strategies if metrics indicate an unmet KPI. Metrics act as a feedback mechanism for evaluating and refining KPIs over time.
  4. Metrics enable performance benchmarking: Metrics play a crucial role in setting benchmarks for KPIs. By establishing baseline metrics and comparing them over time, organizations can track their progress and set realistic targets for achieving their KPIs. Metrics help determine whether KPIs are ambitious yet attainable.

KPI Vs Metric

  1. KPIs indicate whether a company is achieving its key business objectives. Metrics, on the other hand, are measurements or data points.
  2. KPIs are high-level indicators of success, while metrics provide insights into how to achieve that success. KPIs are the goals, and metrics are the means of achieving those goals.
  3. KPIs have a specified timeframe, and metrics are recorded in real-time. For example, a KPI for a company might be “increase revenue by 30% in the next fiscal year.” The metric associated with this KPI could be the “conversion rate of website visitors.”
  4. KPIs are quantifiable measures that evaluate the success of an organization, employee, or some other performance aspect. Metrics are the tools used to track and measure progress toward a goal. To set KPIs, metrics must be relevant.
  5. KPIs are specific to an organization’s goals and objectives, while any organization can use metrics to measure performance. This means KPIs will differ from organization to organization, while metrics are standard.
  6. KPIs are actionable; they indicate steps taken to improve performance. Metrics, on the other hand, are simply data points that provide performance information.
  7. All KPIs are metrics, but not all metrics are KPIs. KPIs are a subset of metrics that help organizations track progress and determine whether they meet their objectives. Metrics are a broader category that can be used for any measurement.
  8. KPIs are strategic indicators that cater to long-term goals and let you determine relevant measurements that impact the organization’s goals and can be easily measured. Metrics help calculate the processes; however, they aren’t necessarily the most important metrics to measure.
table showing difference between kpi and metric

While KPIs and metrics are different, both are essential for a business that wants to track and improve its performance. Tracking the right KPIs shows businesses if they are on track to meeting their objectives. By tracking metrics, businesses can identify areas of improvement and optimize their performance.

If you are using any ERP software, you can use a software dashboard to monitor and track KPIs and metrics.

KPIs Vs Metrics: Examples

KPIs are specific and measurable, for example, “increase web traffic by 20% in the next quarter” or “achieve a Net Promoter Score of 75.”

Metrics are the data points businesses want to track to measure progress toward their KPIs. So in the example above, web traffic would be a metric.

Let’s look at some examples of KPIs and metrics.

Example: 1

KPI: Increase web traffic from organic searches by 25% in the next quarter.

Metric: Web traffic from organic searches. (Other related metrics could include organic keyword rankings, click-through rate, etc.)

Example: 2

KPI: Achieve a Net Promoter Score of 75 by the end of the year.

Metric: Net Promoter Score. (Other related metrics could include customer satisfaction scores, number of complaints, etc.)

Example: 3

KPI: Increase conversion rate from website visitors to leads by 50% in the next quarter.

Metric: Conversion rate from website visitors to leads. (Other related metrics could include the number of website visits, forms completed, etc.)

Example: 4

KPI: Increase ROI by 30% in the next fiscal year.

Metric: Revenue. (Other related metrics could include gross margin, customer lifetime value, etc.)

Example 5

KPI: Reduce customer churn by 50% in the next year.

Metric: Customer churn. (Other related metrics could include customer satisfaction scores, number of complaints, etc.)

KPIs are specific and actionable. They provide a target and help measure progress. Metrics are the data points that measure the KPIs.

Why Differentiate KPIs and Metrics?

Metrics are important for measuring progress and performance. KPIs drive a business to achieve its goals. In other words, KPIs are leading indicators of success while metrics lag.

When a business sees results from its metric data, it is too late to change course. KPIs, however, can give an early warning sign that something isn’t going as planned and allow you to take corrective action.

Not all metrics are the same. Some metrics are more important than others in predicting success. For example, a metric for customer satisfaction is a good predictor of future revenue. This metric is more important than other metrics, like website traffic.

Therefore it is important to choose KPIs carefully. The important KPIs are linked to the company’s goals and are good predictors of success.

How to Set KPIs for Employees

When creating KPIs, consider the following questions:

  • What goal is the business trying to achieve?
  • Who is responsible for achieving that goal?
  • What resources are available to help them achieve that goal?
  • What timeframe are they working with?

After considering those factors, you can start developing KPIs. 

Below are the steps to follow when setting KPIs for employees.

Step One: Draft a Goal Statement

The first step is to develop a goal statement. The goal should clearly and concisely outline the business’s goals. 

For example, “Our goal is to increase sales.”

Step Two: Identify the Metrics to Measure Progress

After developing a goal statement, you must identify the metrics to measure progress. This will vary depending on the business’s goals, but some examples might include measures like sales volume, conversion rate, or customer satisfaction.

Step Three: Set Targets for Each Metric

The next step is to set targets for each metric. These targets should be specific, measurable, achievable, relevant, and time-bound (SMART). After setting targets, you can create KPIs.

KPIs should be aligned with goals, and they should be used to measure progress towards those goals. For example, if the goal is to increase sales, a KPI might be sales per month.

Step Four: Assign KPIs to Employees

After developing KPIs, you need to assign them to employees. The employee must understand the KPI and its contribution to the goal.

Step Five: Track Progress and Adjust as Needed

The final step is to track progress and adjust as needed. This means regularly reviewing the KPIs and making changes if necessary. Businesses can adjust targets, KPIs, or goals if necessary.

By following these steps, organizations can develop KPIs aligned with their business goals, which will help them track progress toward those goals. Remember, KPIs should be reviewed and updated regularly to remain relevant and effective.

Tips when setting KPIs:

  1. Ensure the KPIs are specific, measurable, achievable, relevant, and time-bound (SMART).
  2. Select good KPIs. A good KPI is well-defined, measurable, and relevant to your business.
  3. Make sure the KPIs align with the company’s overall strategy.
  4. Make sure they are relevant to business goals.
  5. Use ratios to measure KPIs
  6. Keep the KPIs simple – too many KPIs can be overwhelming and difficult to track.
  7. Assign KPIs to individuals or teams, depending on who is responsible for achieving the goal.
  8. Review and update the KPIs regularly.

Conclusion

Businesses need to understand the difference between KPIs and metrics and how they are useful for measuring business performance. Selecting a good KPI with the most relevant metrics is important for tracking business performance.

Fahad Usmani, PMP

I am Mohammad Fahad Usmani, B.E. PMP, PMI-RMP. I have been blogging on project management topics since 2011. To date, thousands of professionals have passed the PMP exam using my resources.