Performance tracking is vitally important for organisations to reach their goals and be successful. In business, KPIs and metrics can be confused as the same thing. Though they work similarly, businesses don't use them for the same purpose.
All KPIs are metrics, but not all metrics are KPIs. That said, KPIs and metrics are not mutually exclusive. When used together, they measure progress towards specific goals and track a business’s overall wellbeing.
In this article, you’ll learn the difference between KPIs and metrics, along with some examples of each. Let’s dive into it!
What are KPIs?
KPI stands for key performance indicator, a quantifiable measure of performance or progress that helps organisations understand how certain departments or their entire company is performing. KPIs mainly evaluate how successful the team is at reaching its business goals and often focus on long-term business performance.
KPIs act as a roadmap of how the team can achieve its business objectives, while providing strategic feedback that tells the organisation how to move forward. KPIs are hyper-focused on targets and objectives, requiring more thought around which goals and targets to set.
KPIs focus on the “key” part of a business’s objectives, meaning they track only what is most relevant for the company’s specific business goals.
KPIs can be financial, like current ratio, gross profit margin and net profit margin. Businesses can also use them to track progress towards other goals, like employee and customer satisfaction. Here are a few examples of important KPIs every organisation should implement:
Financial performance KPIs
Gross profit margin – measures the percentage of revenue left after subtracting the cost of goods sold. In other words, this KPI tells you how profitable an item is without considering overhead costs.
Inventory turnover – measures how often an organisation sells its entire inventory during a specific timeframe.
Customer satisfaction KPIs
Customer Satisfaction Score (CSAT) – measures a customer’s satisfaction level with your company overall or during a specific interaction.
Net Promoter Score (NPS) – measures the likelihood of a customer recommending your product, service, or business to others.
Sales Qualified Leads (SQL) – the number of prospective customers who show intent to buy.
Sales per rep – measures how many sales each rep makes. This can establish a sales baseline and set goals for each sales representative.
What are metrics?
Metrics are quantifiable measures that track, assess, or compare the performance of certain business activities at both high and low levels in the company. They are more relevant for specific business areas or departments, such as tracking how fast units sell and how many customers sign up for emails.
Though they are helpful, metrics are not critical to a business’s success. Metrics aren’t the most important indicator to monitor strategic business activities, but they still provide valuable insight into how well the business is progressing.
Metrics measure the organisation’s overall health and can provide helpful data about the business. The marketing team generally uses various digital marketing tools like Google Ads, Google Analytics, email marketing tools and more to gather data and monitor important business metrics, such as the ones detailed below.
By tracking different metrics, you can measure the growth and development of your business. Here are some of the most important metrics every business should track:
ROI indicators – determines which investments will return a profit. This helps businesses decide which investments are worth pursuing and which they can scrap.
Profitability – tracks profit margin and compares that data to the organisation’s goals. This information helps determine which adjustments are needed to reach those goals.
Sales performance metrics
Lead generation – assesses the prospect stage of acquiring new sales. Good examples of metrics to track in this category include the percentage of follow-ups and average lead response time.
Sales productivity – tracks the rate at which the sales team or an individual employee reaches revenue goals.
Employee performance metrics
Quality of work – measures the quality of an employee’s performance.
Quantity of work – tracks metrics like the number of items produced or sales generated.
Efficiency – combines data from quality and quantity metrics to track the resources used to produce an output.
What is the difference between KPIs and metrics?
Though KPIs and metrics often overlap, there are a few key differences between the two. KPIs and metrics are both quantitative measurements, but they focus on different things. Businesses use KPIs to track specific business goals and metrics to measure business activities or processes.
KPIs are more structured and cannot be loosely made. They must have targets, a specific timeframe to reach them, and apply to business outcomes, while metrics may or may not follow the same structure.
The main difference between KPIs and metrics is that KPIs have the most impact on moving a company forward. They clearly state and provide valuable insight into what metrics the team should measure and achieve to reach long-term business objectives.
Here’s an example. Let’s say your goal is to increase profits by 20% in the next year. Your key performance indicator might be sales growth, which tracks the number of products sold. That KPI will often include multiple sales metrics, including time spent selling, the number of sales tools used by the sales team, and the percentage of revenue from new versus existing customers.
Though used for different purposes, both KPIs and metrics are useful in tracking a business’s performance. Remember that KPIs don’t exist without metrics, so you should implement both if you want to be successful. Smart teams use multiple metrics and KPIs to leverage the best results and get a strategic sense of how their business is performing.
Another topic that you might want to explore is the opposition of KPIs vs OKRs. You will often find similarities between KPIs and OKRs, but these system complete each other and should be used together.
Want to add some accountability to your team’s metrics and KPIs? With Tability, you can keep your top priorities in mind while regularly checking in with your team and sharing progress updates. Get started for free today.