Metrics vs KPIs
Since Metrics and KPI are used interchangeably to refer to the same in some contexts such as in performance management systems people do not appreciate the difference between Key Performance Indicators (KPIs) and Metrics. A metric refers to a value that is coming up in some form. For example, net sales values, customers in number, etc. Therefore, a metric is something one can measure. So the measurability is a prime concern of a metric. The interconnection between a metric and a KPI starts when a metric reflects the achievement of a particular end state. It is important to note that all KPIs are metrics. But all metrics are not necessarily KPIs. In this regard, KPI should reflect the actual performance of a company, meaning, it should be real. The real KPIs improve performances of a company. Therefore, the importance of developing a true and an achievable KPIs are highlighted because wrong KPIs incur harm than assisting. Another distinction between metric and KPIs are brought in relation to measurements. All KPIs and metrics comprised measurements. Therefore, a measure experimented in time is referred to as a metric. And once a metric is included in the performance management, it becomes a KPI.
What is a Metric?
A metric refers to a direct numerical measure that depicts business concept(s). For example, net sales by annum. In this example, the measure is dollars (i.e. net sales) and the business dimension is time (i.e. annum). In this particular measure, the company may want to know the values among different levels in this dimension. For example, net sales by month, net sales quarter, net sales by bi-annual, etc. by incorporating the same measure of dollars (i.e. net sales). The multi-dimensional analysis is also another concept that is used along with the notion of metric. This involves observing the measure more than in a single dimension, say, net sales as per business territories.
Good Metrics
To say a particular metric is good, we should incorporate many qualities in it. First, a metric aligned to the core of the business is crucial. So every measurement (i.e. metric) that we use in a company should align to the core of the business. Predictability and actionability are two concerns that come next. All the measures should be predictable and actionable. Putting it simple, metrics developed in the business should be feasible. Otherwise, the company may not able to achieve it. Thirdly, time considerations come. Provided that all the metrics are measured in time, we should be able to track them over the period. Finally, good metrics adhere to the criteria of comparisons with the peers (i.e. competitors). As the industries are highly competitive, the metrics developed should have the attribute of comparability. By comparing other competitors’ metrics, the company may identify the possible area of improvements, etc.
What is a KPI?
Importantly, all the KPIs are associated with a predetermined target. Often, KPIs demonstrate up to what extend the metric is below or above the set target. Therefore, KPIs express the achievement levels of the area. Same as metrics, KPIs are also associated with characteristics. A KPI generally repeats company goals. This expresses that if an organization sets a sound KPI, it leads to continuous improvement results in the company. Very importantly, all the KPIs are decided by the management of the company. The establishment of KPIs involves high managerial levels of the company because KPI links with future expectations. Further, having defined KPIs, it leads to ease in relation to the functioning of different organizational levels. The KPIs are considered as a legitimate data source of the company as accurate financial measures are involved with them. Also, the KPIs are understandable to everyone in the company as those are comparatively expressive. Finally, KPIs lead to proper action in the company because KPIs tell what to do.
Key attributes of KPI
The key attributes of KPIs are the indicator, performance, and the key. Indicator should be depicted by a number. For example, average customers in the queue according to daily reports is a good indicator. Performance is always concerned with the outcome. And finally, the key refers to the importance in relation to the business, department, or the team in the company.
What is the difference between Metrics and KPIs?
• Definitions of Metrics and KPIs:
• A metric refers to a measurable aspect of the business.
• When a metric is reflecting an end state, it becomes a KPI.
• Examples of Metrics and KPIs:
• Carbon footprint is one of the topical concepts among companies at present. Air pollution is one of the end results of it. Therefore, air pollution can be identified as a metric.
• An organization that is concerned with dropping the negative environmental impact of the production process considers KPIs for safety, security, health, etc. as important.
What is the Similarity between Metrics and KPIs?
• Measurement is one of the main concerns of metrics and KPIs.
Images Courtesy:
- The Marketing Metrics Continuum by Zithan (CC BY 3.0)
- SharePoint dashboards by EngineerTech (CC BY-SA 3.0)
