Head to Head: Metrics vs KPIs
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Information detailing the efficiency of a business is vital to determine not only the efficacy of the business, but to pinpoint areas that need improvement, or that simply are not working. A couple of terms that get tossed around when it comes to performance reporting are metrics and Key Performance Indicators (KPI). There is a level of confusion about these two measurements, primarily concerned with the differences between the two, and which would be the ideal tool to use. To understand when to use metrics and when to use KPIs, it would be best to first take a deeper look at the two.
A metric, to put it in its simplest terms, is a number or group of numbers that defines a variable. That variable is a measurement used to measure an aspect of a business. This aspect can be as varied as the length of time a segment of a process takes, or the number of late clock-ins in a department, or the number of change notices drafted against a design. Anything that can be measured will produce a metric. If there is a question about any aspect of a business, and that question’s answer can be quantified – then it is a metric.
The problem with the openhanded nature of metrics is that not all are inherently useful, and it is easy to fall into the trap of measuring things for the sake of measuring them, and wasting time not only in the measuring, but in trying to improve efficiency where it isn’t needed. Using the right metrics is where KPIs come in.
Key Performance Indicators
The first thing to understand about KPIs is that they are metrics. They are not a different measuring or reporting tool. KPIs are metrics with a purpose. KPIs tend to be drafted by management and designed with a business’ core goals in mind. They measure very specific things – most significantly they measure how well a company is performing against their desired goals.
KPIs should help put the information they provide in context. While the number of unique visits to a company’s website is interesting information, a KPI that measures the ad Click Through Ratio is actually useful and provides context for the raw visit numbers. For a brick and mortar store a KPI that measures the number of customer interactions with customer service is helpful, but a KPI that quantifies those interactions into categories such as product returns, questions, and complaints will provide context and help drive process improvements.
One way to help clarify the distinction between metrics and KPIs is to remember that while all KPIs are metrics, not all metrics are KPIs. KPIs are targeted metrics that provide useful information that puts the raw data into context to help drive positive business change.